Your Money Tree

Like this tree, we can struggle to grow wealth without a proper foundation, but it is neither wise nor sustainable long term.

This is a picture I took the other day in Canary Wharf, London and the tree is growing on a raft which was originally placed there for the local birds to nest on. There is no soil there. However, nobody bothered to tell the tree that; and it just started growing there about two years ago. How long do you think it can last living on a raft with no ability to create a solid root system while floating on salt water? My guess is not long, but I am certainly ‘rooting’ for this tenacious tree!

Your money, like this tree, also needs a proper root system. No matter how tenacious you are with your goals, creating a foundation is not only needed to build wealth, but it is essential to sustaining its growth. That ‘root system’ is an emergency fund. People resist emergency funds, even professionals! However, they are an integral part to growing your ‘money tree.’ It allows you to handle life’s storms without comprising your entire financial situation.

I go into much more detail in my book, but your emergency funds should be 3 – 12 months of living expenses depending on your circumstances as in an assessable cash or cash-equivalent account. If you do not have one, you can start a monthly savings plan to build up to three month expenses. Once there, if you feel you need more because you have unstable work, are an expat, or any other various circumstances that make you feel like you need a bigger foundation, then work up to 12 months.

Emergency funds are magic. Once you have one it:

1.       Decreases the financial drama of an emergency to an inconvenience.

2.       Reduces worry about those ‘what if’ scenarios like job loss, or an unexpected bill.

3.       Means you will not have to go into debt to manage this situation.

4.       Funny enough, once you have one in place, you may notice less need of it.

In life, prosperity can take root in the oddest of circumstances, just like our friend on the raft. This is not the norm but the exception, which is why more people take pictures of this tree (like I did); rather than take a picture of any number of the significantly older, larger and healthier trees at the park around the corner. We can always root and celebrate the underdog, but try not to strategically be the against-all-odds long shot. Proper planning may not always be flashy, but it is sustaining. Strategically plant and nourish your ‘money tree’ and take care of it so it can shelter you when needed. 

How much do you feel is needed for an emergency fund?

Disclaimer: This article if for educational purposes only and is not personal financial advice.