Newsletter: Is it Time to Rethink Your Emergency Fund?

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Welcome to the FI Mastery Journey, a weekly newsletter where you receive actionable ideas from me to help tame financial chaos, get your financial house in order and live your legacy.

Here’s how it works: each week, you’ll receive one article written by me. You’ll also get three simple questions that go along with the week’s article to help jog your mind and inspire you to take small, bite-sized financial wellness actions.

And, you’ll also get an inside look at the research I’m reading.

Follow along for one year and you will have completed all the work necessary to keep your financial house in order.

My goal in all of this work?

To provide you with the tools, resources, and insights to help you take one step closer to becoming the master of your own financial independence journey.

This Week at a Glance

  • Everyone knows that an emergency savings fund can help mitigate unexpected life events. The downside for high earners is that you could be sitting on a lot of cash that isn’t doing anything for you. That’s why in this week’s post, we discuss ways to optimize your approach to emergency savings.
  • October headline inflation data came in softer than expected this week and markets rallied. Why? Because investors are now hopeful that with inflation cooling, the Fed could start cutting interest rates, maybe as soon as mid-2024.
  • ICYMI – The holiday season is a time of giving, and not receiving, right? Well, if you’re struggling with figuring out how and to whom to give, then be sure to check out last week’s post on how to create a giving strategy. Here you’ll learn how gifting, philanthropic giving and effective altruism all require different levels of time and resources.


Do You Still Need an Emergency Fund?

At what point is an emergency fund no longer necessary for your financial situation?

Never, right?

Because common sense tells us that everyone needs an emergency saving fund.

Indeed, you’ve likely heard how crucial it is to have money set aside as your first step in building a solid financial plan.

But the fact is that for some, an emergency fund in the traditional sense tends to make less sense as a household earns more money and accumulates more assets.

Now, make no mistake, for many families, a well-funded savings account can make the difference between staying solvent and falling into a tight financial predicament.

But with that said, a time likely will come for high-earning individuals and families when having any more than a few months’ worth of living expenses in your bank savings account just doesn’t make sense anymore.

To be sure, when it comes down to it, a dedicated emergency fund may have served its purpose early on in your career. But now, as your station in life has become more favorable, you’ll likely need to take a more tailored approach to mitigating financial risks.

Ultimately, as your income and net worth rise, following generic financial advice will likely lead to suboptimal outcomes for your cash savings.


How to Evaluate Whether You Need a Cash Management Plan

That’s why having a cash management plan in place and transferring financial risks to suit your unique financial situation is crucial to making the most of your money.

Here’s what you can do to evaluate whether evolving beyond your emergency fund is the right move for you:


Step 1: Reassess the Role of Your Emergency Fund

Take a deep dive into your financial assets and evaluate the real need for your emergency fund.

Ask: Given my unique financial position, do I genuinely need an emergency fund as large as I currently have?

By knowing your true liquidity needs and reevaluating your emergency fund, you can possibly free up significant funds that could be better allocated for optimized returns.


Step 2: Design Your Personalized Cash Management Plan

Distribute your savings among various savings and investing vehicles in a way that maximizes growth opportunities while ensuring liquidity for unexpected needs.

Ask: How can I strike a balance between having liquid cash for emergencies and ensuring my money is working for me?

Creating a cash management plan ensures your savings are actively adapting to your needs, rather than sitting idly by and missing out on potential growth.

Step 3: Transfer Your Financial Risks

Analyze your current insurance coverages and weigh the cost-benefit of paying premiums to transfer potential financial risks versus self-funding them.

Ask: Given my high earnings and assets, what is the real cost of transferring potential financial setbacks I might face by buying more insurance coverage?

By transferring financial risks at minimal cost, you can gain peace of mind knowing that you are protected from unforeseen losses.


What I’m Reading

We’re all busy in the daily rush of things. That’s why I’m sharing a list of articles that I’ve read this week to help me stay on top of my own financial independence journey.

You can find links to these articles in the daily feed at

  • The Magic Loop – A Framework for Rapid Career Growth
  • Why Now is the Time
  • How to Stop Wasting Time and Money on the Impossible
  • Core Inflation Hits Two-Year Low
  • China’s Xi Jinping in US for Tense Biden Summit

Thanks for taking a look,