After you have built up your emergency fund, started saving for your children’s college education (if you want to make that choice, which I don’t agree with) and invested in whatever retirement plans are available to you, it is time to build up your “go to hell” fund.
Your “go to hell” fund.
If you are working for a living, you need to start building this fund as soon as possible. With the shifting economic landscape you run a far higher risk of being part of a massive company-wide layoff than ever before. When that happens, it won’t matter who you are, whether it’s a good time for a layoff or a bad time, or whether you have enough money to pay for that new set of brakes you need on the car.
Let’s put this in perspective. When I was working in corporate finance, I participated in a “restructuring” project. This word is a euphemism for “firing lots of people to improve the bottom line and making the remaining people pick up the duties performed by the ones who got fired.” There are a million cute terms for it these days: downsizing, rightsizing, eliminating redundancies, even the old-fashioned “layoff,” which implies that your job will be given right back to you when the company gets over this tough little patch… awww, thanks, Mr. Smithers.
You will be fired at some point, or you will come so close to it that you will be asked to leave or you will fire yourself. The chances are very good – particularly if you work for a big corporation – that the glacial movement of your titanic company will inevitably smash your department into another through mergers or spinoffs or simple cost-cutting. You will be gone.
Alternatively, you may be frustrated. You may not WANT to go from being the Assistant Associate Vice-Manager of Finance at Bank of America to being the Associate Assistant Vice-Manager at Citigroup. You may want to go spend a year starting up that flower shop, or that consulting business or that scheme selling freeze-dried soup over the Internet that you dreamed up over margaritas on vacation last year.
In every case, wouldn’t it be nice, when they call you in to discuss your future with Megacorp with quivering tears in their cold mechanical eyes, to be able to say “go to hell” and walk out the door?
I’m not actually advocating saying “go to hell”. You have no need to burn bridges, but figuratively speaking there is no greater freedom – short of actually having financial freedom – than knowing you have enough money to walk away from a job for a few months and start your job-hopping again at a leisurely pace. That is true freedom in the corporate world.
Most importantly, if you have a “go to hell” fund, it won’t bother you when your company disappears from existence on a Sunday.