This is why you should start an emergency fund today.

Beware the golden handcuffs.

My belief in emergency funds, or opportunity funds, or freedom funds--whatever you want to call them--runs deep. Why, you ask? Because in the past 13 years it has changed my own life.

It all started in 2007. I was just graduating from Harvard, ready to start a lucrative, lifetime career as a stock analyst. And then David Gergen took the stage in one of the commencement exercises. He went on to explain in great detail the single disrupter in the ability of graduates to change the world: the golden handcuffs.

Literally getting shackled to a job because you live paycheck to paycheck or have a lifestyle only paid by that job and difficult to find elsewhere.

I had never heard that term, but I had certainly lived it. See, at that moment all I had in the world was the few thousand dollars left in my checking from my student loans.

Let’s start from the beginning, but please note that I am literally cringing as I write the whole truth. 

I was an entrepreneurial kid, always babysitting, always working, always the one in the neighborhood with the lemonade stand. But as soon as that holy dollar got in my sweaty fist it was gone, gone to whatever whim was in front of me.

I got money in college from my grandmother: $300 a month, which was a lot of money in the late 90s. It was gone by the 15th of every month. I think back on money habits I had back then that even today, making a really good living, I would never do. For instance, on weekends when I didn’t have anything to do, my friends and I would wander into stores and “shop.” Which of course ended in us buying stuff.

Paid summer internships--money blown. Job after college--money blown. 

I am typing this next piece with only one eye open, but student loans. I remember the student loan office telling me I could take out as much as $15,000 and that I could give back anything I didn’t use. That sounded reasonable---sure, give back anything I didn’t need. Coincidentally, I kept taking the disbursements and happened to need to spend it all on living expenses. There, I said it. I took on student loans that were then blown on lattes and entertainment and clothes. 

So, yeah, hearing about the golden handcuffs for the first time made a lot of sense. If Einstein was right, then I, without intervention, thinking that I would naturally save, even though I was making a lot more money, was the definition of insanity.

Within days of graduation, back in my hometown, about to start my new job, I committed resolutely to become a saver. Saying “pass” on the $1200 apartments by the river that many were opting for or the little BMW 3-series that would pull into the parking garage, I downsized my own dreams and settled on a small apartment at $525 per month and used those last few thousand to pay for an older model car (car payment? No thank you). 

With my overhead sufficiently well below my pay, I was in a position to save. Now, saving was not going to be natural for me. Remember, I love to spend, and it feels super great to my brain to adequately clean up all dollars in my account to keep it nice and tidy at a zero balance.

So, I took to my excel spreadsheet and gave myself “budgets” to live within. I obsessed over my money in a complete determination to save. I even made myself a company and acted as her CFO, modeling out my own profit and loss, or “P&L” statement. Every month I grabbed those savings dollars and threw them into a savings account. I watched as my company balance sheet and net worth grew with these savings pouring in.

It took a good year, and I looked up and realized “Wow, I am a saver.” I was saving and peacefully coexisting with money in the bank.

Three years later, I had an idea for a business. Unlike past ideas for businesses that I would dream up but realize would never happen (because no money), this idea came with a pile of cash to back it up. Still in the depths of the deepest recession in my working career, I walked away from my lucrative, stable full-time job into the unknown and started my own company.

Building a financial company from scratch sounds easy, I realize, and my rosy picture and projections certainly pointed to profitability in 6 months. Thankfully, the cash pile and the thrifty decisions my husband and I made in the early part of our marriage meant that we could survive the reality of my business—as soon as I faced the fact that profitability would be measured in years, not months.

That emergency fund is the reason I am a happier person. I was meant to be an entrepreneur. I love the risk, the ideas, the people, the goals, the heartache and the achievement. I love it all. And I shudder to think that I might not be living this life if it hadn’t been for that one presentation--learning about the golden handcuffs.

Just this past March, my husband had to shutter his business (#becauseCOVID), a salsa dancing night club in the River Market district. Like me, he is an entrepreneur and had built this business literally with his two hands. He built the dance floor, he designed the space, with friends sitting on the floor, we strung and hung the gorgeous chandeliers. The moment COVID forced us to lock the doors into an unknown future, we shored up our cash position to last for at least a year--if not more. It would be heartbreaking to lose our place that brings us and so many people joy. We don’t know the ultimate outcome of his business, but I believe that with the help of our emergency fund, we will get to keep it.

Cash piles are not just for entrepreneurs, though. I want to tell the story of a young client in his 20s who came into my office. His parents wanted him to buy a house and “stop throwing money away in rent.” I told him we needed to build an emergency fund first and save for a down payment. Six months later he called and told me he had quit his job. This introverted programmer was getting burdened with extra hours during the recession as employees were getting laid off. It was a negative place. His supervisor actually yelled at him occasionally. When that cash pile got to a certain size, he remarked that it made him actually notice how toxic his job had become, and what he could do about it.

He walked away. Without another job. 

Three months later he called and had been happily situated at a job with people who had already become like family. He was happier. And he then bought a house a year later.

I did end up seeing his beloved coworkers but under sad circumstances. My sweet client recently lost his life to a devastating cancer, rare for someone his age. I think so much about what his final years would have looked like if he had stayed at the old job, if he hadn’t had the emergency funds that allowed him to walk away with confidence.

In summary, as a devoted spender speaking to my fellow spenders, there really is a point to saving. You may not see it now, but your story may go somewhere beyond your wildest dreams. And that journey very well may require that you start with a pile of cash.

So please, I beg you.

Don’t delay.

Commit to starting one today. Tomorrow, I will tell you how.

Photo by Alexander Mils via Unsplash