When I first got myself out of debt and began to save money years ago, it took quite a long time to accumulate a balance of $10,000 in my checking account thanks to my underearning tendencies. For some reason $10,000 was the magic number that I thought would keep me safe, secure and free of worry. With $10k in the bank, I knew I would have enough money to live on for about 5 months fairly frugally if something bad happened – longer if I was super frugal.
I was driven to accumulate that $10,000 because to me it represented safety. It meant that I would never be homeless or go hungry. I’ve never been homeless, but I have gone hungry in the past because I haven’t been able to afford food. I know that this fear of going hungry is the reason behind my overstocked pantry.
When the balance moved over $10k, it was much easier to spend the excess and my spending would go up. So I started the practice of moving every second paycheck over into my RRSP (tax free retirement) account which was a guaranteed way to save 50% of my salary without having to budget at all. During the month when I would spend the remainder down, it drove me crazy to see an amount less than $10k in the checking account. I would feel worried that I wouldn’t be okay again. That drove me to spend less the following month to try and get the balance above my safety margin because I never stopped moving every second paycheck over to another account.
Today, thanks to the rule of $10,000 and the practice of moving the excesses over into my RRSP – and when I maxed that out, into my stock account or high interest savings account, I have more than enough to feel safe for the next 50 years. Yet when I log into my online bank account, I still don’t feel comfortable unless I see that $10,000 sitting there.
Maybe that’s neurotic, I don’t know. But I think you need a bit of neurotic now and then to get rich.
JJolie – I like how you use real numbers when describing things. You remain anonymous but still manage to be relatable through some number specifics – I think that gives a little guidance for others, even though our numbers are all different.
If we were all more open about our numbers, I'm convinced that more people would understand their own financial situation.
Thanks Kelsi! I feel the same way about numbers – give me something to wrap my head around, compare or whatever. Truth is, I'm anonymousish because I just don't want my ex to hunt me down. Heheh
I also think financial transparency helps to eliminate the smoke and mirrors that people put out. I have a big problem with people telling other people how to do something if they have not done it – and succeeded long term themselves. I see people eliminating their debt, but until you've been completely free of it for years, you can still get caught in that mindset of thinking just this once, it will be ok. It's insidious, dare I say evil.
One of these days – maybe for May or June, I'll do a straight download of my bank/cc accounts to show exactly what I spend – that might be TMI though.
You will like some future posts then I hope since when I was decluttering, I found some old bank and credit card statements from 'the poor days'. Depressing yet motivating.
Scarlett O'Hara said it best: As god is my witness, I'll never go hungry again! LOL
Your goals are something I aspire to. You inspire me, keep up the great posts, someday perhaps I will be more in your shoes than my own!
WBY, you'll get there. I think once you have something accumulated, the drive just goes up to get more and see how far you can run it. You'd think that there'd be more of a drive to extinguish debt, but it just doesn't seem people think that way. I think because having the cash in the bank gives confidence in yourself.
My friends just tried to talk me into going to Mamma Mia. When I found out the tix were ~$250, I backed out. They were like 'give me a break, you have more money than any of us.'
I said 'how do you think I got it?'
Great Post, and I can totally empathize.
I have gone back and forth several times and have seem to set my limit for my checking account around $3,000. That is beyond my retirement, ING savings, BoA Savings and other monies scattered around.
The issue I have is will I ever have a $3,000 emergency come up that I have to have the money in my checking that minute or all will be lost? Probably not, but if that amount gets under $3,000 I get very anxious.
I think its a great motivator to set "unrealistic" points that might not have implications for our day-in day-out living, but in the long run keep us out of trouble.
Thanks Odysseus! I think for me it's a psychological safety buffer that may not make a lot of sense to someone else.
Particularly now that I'm expecting to retire, it's something I'd like to continue doing to avoid transaction fees on selling and withdrawing from my stock account too. I'd like to have 6 months expenses immediately accessible in my account at all times. I want to withdraw / sell stocks when the timing is right more than when I need the money if that makes sense.