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You Don’t Need a Million Bucks, You Need a Cash Cushion ⚡

7th February 2019

financial education

Let me tell you a secret: You do not need a million pounds. You need a cash cushion.

What? Yes. We all think we’re going to need a ton of money to do the things we want to do. But truth is, you don’t need a ton, you just need some.

That’s what a cash cushion is; some money ready for you. You might have heard of a cash cushion as an emergency fund – which it also is. However, you don’t need to use your cash cushion only for emergencies – as a young adult who might not be making much, a cash cushion has a lot of other amazing purposes. 🔥

Most finance gurus recommend aiming for 6 months of expenses – but just starting with 1 month can be enough, and then build it up to 2, 3, 4 months.

And here’s what you can do with them…

1. Cover unexpected costs

No matter what age you are, you will know how stressful it can be have an unexpected cost: a broken phone, a broken laptop, or even something more serious such as a medical expense or a car breaking down.

It’s mighty stressful, which is why your 6 month cash cushion can literally be a life saver. You’ll sleep better at night knowing if something happens, you’re going to be ok.

This is why it’s recommended to put your cash cushion in cash, in a separate bank account. Yes, it won’t be gaining interest, but it’ll be easy to access in case of emergencies and will allow you to sleep better at night.  😴

cash cushion
she’s got a HUGE cash cushion

 

2. Capital – a 0% loan to yourself

As a twenty something year old that doesn’t make much, I usually wouldn’t be able to afford a big trip or holiday. But last NYE I went to Dubai and then Turkey – the trip was pricey (more than expected 🙄), BUT I was able to afford it thanks to my cash cushion. 💁‍♀️

This cash cushion literally provides me with a 0% loan to myself whenever I need a bit more money upfront.

This is also life changing. It means you have enough money for that extra rent deposit. It means you have enough to pay for your driver’s license. It means you have enough to visit your friend in Mexico. It gives you freedom and flexibility.

The important thing here is to have the discipline to pay it back every month. I take a percentage of my earnings and pay back my cash cushion every month – without interest 😎

 

3. Job problems

You got fired. You can’t find any clients. You’ve just arrived in a new city. Whatever the reason, you’re currently not making money and need to survive.

Who should I turn to? Who will help me get started? Who will feed me? Yep, you thought right: Cash Cushion. 🎁

A cash cushion is essential when going through money problems – less stress, more time. And while you’re building those essential money making skills, you can live on your 6 month capital. Of course, it does mean that after 6 months you will run out of money… so make sure you get something lined up pronto.

But this is why I never stop contributing to my cash cushion. Every month I set a percentage of my income to Cash Cushion, but once I hit my 6 month mark I keep building it. I’ll only stop when I’m 100% comfortable with the amount.  👌

 

4. Mini retirements

Mini retirements are a cool term that really mean ‘gap years’. This mini retirement of one year (or however long) could be whenever – after high school, after university (if you go), between jobs.

Mini retirements are for when you feel like taking a break from life and want some time off.

And who will you turn to? Cash Cushion 🎁. A 6 month cash cushion might give you a 3 month mini retirement, but imagine what you could do if you had a 1 year cash cushion, or a 16 month cash cushion! Freedom 😍.

The great thing about being in this situation is that you’re not relying on anyone for money. Not your boss, not your parents, not a client. Just your very own Cash Cushion built by you.

cash cushion
time for a mini-retirement

Why 6 months?

Cool. I want to start building my cash cushion. Where do I get started? Why does it have to be 6 months? The finance gurus recommend 6 months because this is normally enough for not too big emergencies and for a few months without earning. But really, it depends on how much you make and how much risk you want to take on. Here are two arguments against cash cushions:

I could be gaining interest with investments: Yes, you are right. However, fluctuations in the stock market make this capital unreliable. Also, selling investments take 3-4 days and by the time they reach your bank account your car will have lost another wheel. Investing is one thing, a cash cushion is another. You want to be both investing and building your cash cushion. Grab a percentage of your income, keep allocating a bit to each. Trust me, the peace it will bring is priceless.

I could just use my credit card and then pay it off: Credit cards are a great strategy to cover emergencies and small expenses. However as a young person, my credit limit is pretty low (mine is currently £1,300), which isn’t really enough. A good tactic would be to use a credit card and then sell investments to pay the card back. It’s a great strategy, but with my credit limit and investments, I’m better off with Cash Cushion. 🎁

So as you can see, your cash cushion strategy can vary depending on what you make, how much risk you want to take on and what makes you sleep better at night. 

A good place to start: open a bank account in another bank (or a neobank, if you want to get it done in 8 minutes 😛) > don’t get the debit card if you don’t trust yourself with not spending > allocate a percentage of your income to that bank account (5-10%) > keep contributing every single month until you feel comfortable. Ta-da, you now have your very own Cash Cushion 😉

Cash cushions really are freedom. Cash cushions are flexibility. Cash cushions allow you to keep your head above the water, and to sleep well at night. On the search to fulfilment you don’t need a million pounds, you need a comfortable cash cushion that allows you to do what you want. That allows you to quit that horrible job, that allows you to travel for 3 months, that allows you to buy a plane ticket to Malaysia. Once you discover the power of cash cushions, your life is changed forever. ⚡

 

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Financially Mint is on another break! ☕ I will Financially Mint is on another break! ☕

I will be living in Kuala Lumpur, Malaysia for the next few months, and then hopefully heading to Australia. 
My plans for the next year:

I'm putting the career testing theory into practice. My next career test is working for an NGO here in Kuala Lumpur. This week will be my first week. I will be working with sex trafficking survivors and I've also been asked to do some financial education presentations to help the staff.

After that the plan is to move to Melbourne, Australia, and do my next career test: consulting. If that doesn't work out I will try another career test which may be more achievable: business development in a startup. Thanks to the amazing career books that I've read, I'm pretty confident I can get an interesting job. We'll see how it rolls. 🏀

How am I funding this? I'm very excited to say that I've managed to grow my part-time freelancing income to a full-time income that can sustain me in South East Asia (I would need to work full-time in Europe). I'm calling myself a 'Freelance FinTech Writer'. Rent is crazy cheap (like 300€/month) and it's literally cheaper to eat out than cook. I'm still able to save 15% of my income. 🎉🎉 The increase in clients and pay has been thanks to all the effort I put into Financially Mint, and to some crazy cold emailing and networking in the past few months. 
After some thought, I concluded that learning mark-up language (HTML + CSS) was a more efficient use of my time than writing blog posts and working on FM... so I am now taking a break to learn some basic coding and decide what to do next.

I will still be podcasting and taking part in the FI community on Twitter and everywhere else... so I'll still be seeing you around 😉

To our success 🎉🎉
Only 30% of jobs are posted online. 🙄 Let's sa Only 30% of jobs are posted online. 🙄

Let's say you've got a list of career paths to test. You've figured out a direction, you know which sector you want to work in and you've got some cool companies in mind.

But then what? How do you get an internship in the company you really want to work for? How do you get a job in that specific NGO? How do you get them to notice you? 🤔

In FM's latest post I share a strategy that I am still testing but seems to work - copied from a book titled 'Designing your Life' by Bill Burnett and Dave Evans:

The strategy: Conducting 'Life Design' Interviews. .
A Life Design Interview is basically meeting the person that has your 'dream career' for coffee. ☕

You find someone who is working at the company you want to work for, in the sector you want to work for or simply has a position you're interested in, and you reach out to them (LinkedIn helps). You ask about their story, their position, how they got to where they are and their advice to people starting out. 
This is what I've been doing for the past month in Edinburgh, and of the 40 people I contacted, I met 8 of them for coffee, my goal to simply learn about their story.

With an added bonus: Trust. ✅

Not only did I learn stuff about working in a startup, or as a content writer or working in an NGO, but I also built a trusted connection. It's those connections that help you find the hidden jobs, the dream careers and the best opportunities.

Check out FM's latest post for a proper run down on Life Design interviews. 💪 (Last week we organised the FI Europe podcast retreat! An amazing 4 days doing speeches, masterminds, debates, boat trips, beach and surfing. Post on this coming soon 🔥)
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#financiallymint #budget #budgeting #personalfinance #savinghacks #makemoney #savemoney #money #shoestringbudget #moneyhacks #moneysavinghacks #financialeducation #financialfreedom #adulting #savingtricks #earnmoney #lifeadvice #counsel #careeradvice #retirement #investing #careerbuilding #skillbuilding #career #selfimprovement #inspiring #fieurope #lifedesign #interviews
Investing in yourself now will return bucket loads Investing in yourself now will return bucket loads in the future. 🔮

I talk a lot about this on Financially Mint - how taking the time to build career capital and explore career paths will allow you to find a career of best personal fit, which will then make you the money you need.

But it is true that I am personally at the very start of this journey, and so can't offer many examples of this working. 🤷‍♀️ Well today, this changes as I interview the Financial Gladiator, who did exactly that.

He went to university to study business in Poland, and finished his masters in Australia. In the meantime, he was doing internships, making connections, building skills and beefing up his portfolio. 
He says it himself: ' I always looked to add experience and skills to my repertoire rather than dollars' 💸.
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7 internships later in several different countries and industries and a lot of hustling, moving around and learning about what career fitted him best, FG ended up in a job that paid him a six figure salary. This kept on snowballing, and in his early thirties he hit a salary of over $500,000. .
That goes to show how much investing in yourself can return in the future.
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$500,000 annual salary doesn't need to be your goal, but it still goes to show that you'll make the bulk of your money after investing in your own career. 📈

A great interview filled with actionable career advice and FG's complete story, check out FM's latest blog post! (Edinburgh castle 🔥)
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#financiallymint #budget #budgeting #personalfinance #savinghacks #makemoney #savemoney #money #studentmoney #studenthacks #studentlife #shoestringbudget #moneyhacks #moneysavinghacks #financialeducation #financialfreedom #adulting #savingtricks #earnmoney #lifeadvice #counsel #careeradvice #retirement #investing #careerbuilding #skillbuilding #career #selfimprovement #inspiring #work
Most of us don't know what we want to do in our tw Most of us don't know what we want to do in our twenties 🤷‍♀️. And that's absolutely normal.

But that's why we don't want to be committing to one thing - who know what you might want to do in 5 years? 🧐

Instead of committing, why not be exploring, investigating and testing career paths. But how can you do this cleverly without being a typical 'millennial-career-hopper'? By building career capital at the same time.

This means that every career test you do will help you build skills, connections and a more solid portfolio. If you have no idea where to start, here are some examples of jobs/activities that can help you build career capital:

1. Working for a growing organisation with a growing performance: this could be consulting, a startup - anywhere with a good mentor and team 👨‍👩‍👧‍👦
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2. Graduate studies - for those who want to work in research, a think tank, etc.
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3. Building a valuable and transferable skill - skills such as writing, programming, designing, data science, etc will always be useful in the future 💻
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4. Creating content - you don't always need a shiny piece of paper or a medal to show that you've done something. Creating your own thing can be just as useful.
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And much more amazing career advice... in FM's latest blog post 🤓
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(I’m running out of pictures to post so here’s one of a beautiful evening in Edinburgh) .
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#financiallymint #budget #budgeting #personalfinance #savinghacks #makemoney #savemoney #money #studentmoney #studenthacks #studentlife #shoestringbudget #moneyhacks #moneysavinghacks #financialeducation #financialfreedom #adulting #savingtricks #earnmoney #lifeadvice #counsel #careeradvice #retirement #investing #peoplemanagement #skillbuilding #career #selfimprovement #inspiring #work
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