I think most people do a good job of forecasting or predicting what could happen in the future, except for the true surprises.
The biggest risk really to many is what you don't see coming. If you don't know to prepare for it, how would you deal with the damage that is amplified when it hits you?
A few examples:
- 2020- Covid
- 2022 Russia invades Ukraine
The common trait isn't that these events were big, it was that no one was prepared for it.
One truth is that if you are only saving for what you see may happen, you'll be unprepared for the risk you don't see coming your way.
So how much savings should you have? I'm guessing more than you think. For those of you who were not affected by Covid, imagine you had been. Imagine you couldn't go to work and you lost pay. Would you and your family be on the same path today?
Here's my thought:
When you are questioning that you may have too much in savings, you may be at the right amount.
Your amount in savings should feel excessive. This will allow your other money to keep working for you.
Imagine have enough savings that the risk profile on your investments goes up? What could that do? Now I'm not suggesting everyone do this. I'm suggesting you look at the bigger picture.
Prepare for the worst and in this case, the really bad stuff.
This goes for how much debt you should have too.
Whatever you think is the right amount of debt for yourself, the reality is probably a little less.
The conversation around efficiency with your cash always goes up with high inflation (like we are in today). This is because people get paranoid about losing purchasing power.
This is where the prediction of what may come their way can backfire. Then they will be unprepared for what they didn't prepare for.
It’s never easy handling the moment you don’t see coming. It becomes harder when you only have prepared for what you do see coming.
Have more in savings even though it feels like a waste and have less debt that you think.