Intro to Adulting: Financial Peace

Wealth in modern times is defined by the difference between the amount of 'I promise to give you cash later' and the cash you actually have to fulfill your promises. It is also now your ability to promise to pay cash later while generating ACTUAL cash. We still have the good old way of generating as much cash with as little debts as possible. 

You are rich when you have a lot of cash.You are wealthy when you can quickly produce a lot of cash. To me, the distinction between producing cash, generating cash, having cash is all syntax. You have money and loads of it.

 No way Captain Obvious. 

The point is, the amount of cash you have determines the control of not only the amount of goods and services available to you, but the control on terms by which you acquire those goods & services. Almost all problems you & I are facing today can be solved by a nice cheque, let's be honest. If we had enough money, some of us would chase our actual dreams. If we had enough cash in the bank, some of us would be better employees. We would work better with less stress about upcoming bills. We would not need to work jobs we hate just to pay bills.

Cool cool. We get it, get tons of money, life is good. But we don't have tons of money!

Most of us (young adults) don't have piles of cash ... yet. So while we build our stacks of cash, there are ways to synthesize the same terms rich people have. They don't worry when their cars get totalled, they don't worry when they lose their jobs, they don't worry about their cards declining on a purchase. So let's do some things to recreate the same effects.

So now let's begin. 


This is a way of providing a replacement for a protected item in the event that the item gets damaged. For example, car insurance. If your car gets totalled it will be replaced with another. Another is life insurance, if you die, your income will be replaced with the payout amount. Employment insurance, if you lose your job involuntarily, your income will again be replaced.

I suggest, in addition to home insurance and car insurance(a MUST by law), get Term insurance. Term insurance not life insurance because you plan to at the end of the term, be rich enough that you have replaced your income with a large enough fund (Some call this retirement). If you have no plan, I didn't use dream, no plan to have the cash equivalent of the term policy payout at the end of the term; get life insurance instead.

What that means, if you get a $100,000 term insurance policy for 10 years, you ought to plan to have $100,000 somewhere in 10 years. You will now no longer need that insurance policy going forward. If you have no plans to have $100,000 in 10 years that you could pull for the reason you're creating the policy. Choose life insurance instead. 

Please don't insure what you can afford to replace. Example, a watch(yes you can insure watches). That's money you can use for useful things. Unless, for whatever reason you'd rather pay the premium.

Emergency Fund

This is a way of providing yourself a safe distance between an emergency/disaster or a bump in the journey of life and your peace of mind. The reason we have one(or as many as you'd like) of these is that life happens. We cannot expect that life won't happen. So we have to prepare for the rainy day so that we are not caught unprepared. It could be a job loss, or a sudden death, an injury. Bad things happen to people, whether they are good or bad.

Please, set aside a pile of cash for the specific purpose of replacing the income for your expenses when 'things' are happening to you. 3-6 months worth of expenses should suffice. You do not want to be looking for money for rent during a desperate situation, it's not a good look. 

Some people do not believe in having one of these IF they have access to a credit product they can use for the same purpose. Whatever works for you.

Account Balance

Please. Please, stop spending your account down to zero or less (if you have overdraft). You should never be in a position for your card to decline.  It is embarrassing for you, the waiter and all of us present at the table. Please, set a number you are comfortable with that signifies 'empty' to you. Don't let your bank account be a sieve. If your monthly account average is not increasing, at least let it remain above broke.

If you are using your budget, I suggest your account balance be more than enough to cover possible deficits.


Setting up these things will not make you rich. However, while you are on your path to it, you might as well get comfortable with having some cash and having back up plans. Having cash reserves in early in life will prepare you for the days you have TONS of money in the bank. If we can get used to the idea of having money set aside that we don't have to spend, I believe we can responsible enough for larger portions of cash.