A shopaholic that saves for rainy days

Those who knows me personally, knows that my greatest hobby would be to shop (one of the key motivational factors that push me)...

So in my last article, I mentioned that I would be sharing more about the importance of saving for the rainy days. Whether you are an entrepreneur, employee or a student, having a positive cash flow is the key to sustainability (common sense), but have you kept aside funds for emergency (I prefer to call it opportunity)? With most experts suggesting at least 3-6 months of living expenses in case of financial emergencies and financial consultants suggesting between 6-12 months of expenses as an emergency fund, there is no definite answer or limit to the amount you should save.

On a personal basis, I would prefer to split my funds into 4 sets: the crisis fund, the opportunity fund, spending fund and investments. Having 0 liabilities and dependents at the current moment, I choose to maximize my cash by allocating only 6 months of my expenses in the crisis fund (which I would adjust along with my lifestyle and income), 20% of my income to the opportunity fund, 20% to my spending fund and 60% of my income to investments. Some if not most, would claim that I am allocating too much in my spending fund, but don't you agree that most of us work for the sake of livelihood and being able to purchase our wants? If not, where is the constant push factor that keeps us working daily? At the end of the day, everyone has their own source of self satisfaction, which mine would be mainly shopping and philanthropy.

So why is it important? During unfortunate (it is subjective) events, there are only 2 possibilities, either it's business as usual or your income would be affected. That is obviously when your crisis fund would come into place to replace your loss of income. Then why did I say that it is subjective? I believe there is always 2 sides to the story. For one to win, the other must lose. Of course there are win-win situations between a pair or maybe a group, but it would definitely cost someone else something whether is it tangible or intangible. During unfortunate events such as the recent Covid-19, many businesses have suffered, however most medical facilities such as hospitals and research centers have benefited from it. This is where the opportunity fund would be useful to leverage on these situations for investment opportunity or even purchase an asset at fire sale price. Of course I am not encouraging one to keep all their assets in liquid form, waiting for opportunities of such to arise (as they only come once in a blue moon), but one should consider diversifying their assets into multiple forms (eg. cash, unit trust, equities, fixed income, properties...) At the same time... please do not forget to set aside part of your hard earned money to reward yourself! Spend wisely and within your means.

"If you buy things that you do not need, soon you will sell things that you need"

~Warren Edward Buffet.