Financial airbag is an integral part of competent and effective management of your personal finances. And every person who is going to become a successful person must begin his path to financial freedom by creating it. And to do this, you need to clearly understand what a financial airbag is, what it should be, and how to create it.
What is a financial airbag
A financial airbag is a certain amount of money (the necessary reserve) accumulated by a person and intended for use in the event of various and critical force majeure circumstances.
Critical force majeure circumstances are life situations in which a person does not have funds for necessary expenses.
Life situations such as job loss, layoff, bankruptcy, some kind of disaster, injury, expensive treatment, etc. can act as force majeure circumstances.
A financial airbag is an emergency reserve that cannot be touched under any circumstances, except for truly critical ones that threaten a person’s continued existence. Purchasing a telephone, clothing, computer and other similar expenses is not considered an emergency. That is, spending money on something that a person will not die without is not a force majeure situation for which it is impossible to take funds from the airbag under any circumstances.
Determining the size of the financial airbag
It is believed that the optimal size of a financial safety net is at least six monthly salaries. When calculating the size of the FPB, it is necessary to take into account two main indicators:
- Urgent monthly needs . These are payments for utilities, fees for mobile communications, Internet, satellite TV, travel, child care, food, taxes, etc.
- Comfortable existence . Here, in addition to payments from the first point, expenses for hobbies and leisure are added: paid clubs, sports sections, visits to parks, cinemas, etc.
The second indicator will be much greater than the first. When creating an emergency fund, it is better to focus on it. After all, the more funds put aside in reserve, the better. If the income is only wages, you just need to multiply its size by 6 and focus on this amount.
Video on the topic:
Or you can calculate all the obligatory monthly expenses. An example of such a calculation:
| Expenses | Approximate amount |
| Nutrition | 15,000 rubles |
| Public utilities | 10,000 rubles |
| Phone, internet | 2,000 rubles |
| Education (kindergarten, school, institute) | 20,000 rubles |
| Loan payments | 10,000 rubles |
| Other payments (transportation costs, monthly purchase of medicines, any services) | 8,000 rubles |
In total, it turned out that 65,000 rubles are spent on monthly expenses. This means that the minimum amount for the FPB will be 390,000 rubles.
The size of the financial airbag will be different for each family. For some families, 100,000 rubles will be enough to live on for 6 months. And for another family, even a few million will not be enough.
What should a financial airbag be like?
To create an airbag, there are rules that every person who decides to create the necessary reserve should know.
1.The size of the financial airbag
It is believed that the optimal size of an airbag should be equal to six months of a person's income, which should cover all necessary expenses for this period of time.
The amount of six months' income is taken because it is believed that this period will be enough for a person to solve all his life problems. This is the required minimum. And ideally, its size should reach 36 times your monthly expenses.
Just remember that if your financial safety net is below the required minimum, this is already something and much better than nothing at all.
2.Airbag currency
In what currency should you keep your savings? At its core, this is also a very important issue, where there are many opinions that, as a rule, diverge. But the rules when choosing an airbag currency remain the same.
Don't put all your eggs in one basket. If one currency depreciates, you should be left with savings in another currency.
The airbag currency must be liquid. In case of force majeure, you should receive it easily and quickly.
Take into account the economic situation in the country. This, of course, will be more difficult to do, but it can be done. Watch the news, read newspapers, ask questions to knowledgeable people, etc.
The most important. No stocks, bonds or anything like that.
ALWAYS REMEMBER: Building an airbag is not an investment. Your goal is to save and preserve. There is no need to try to benefit from it. Otherwise, you will simply lose your entire reserve.
And what conclusion can be drawn? If you consider that it is better to distribute savings among different “baskets”, you could easily and quickly receive them, and your goal is their safety, then we can safely say that your airbag should be stored in Russian rubles. At least most of it. Some funds can be converted into the currencies of other countries. Only their number should not be significant, so that in case of their loss, you have a sufficient amount of money left in case of force majeure.
3.Where to store a financial airbag
The safety of your airbag is a major concern that you should take very seriously. Otherwise, you are simply in danger of losing your reserve savings.
The important and most important condition when determining where to store your airbag is that:
- firstly, it could be obtained easily and quickly;
- and secondly, it should not be easily accessible.
It sounds a little contradictory, but it can be explained.
“Easy and fast” means that in the event of force majeure, you could take your money today. Not tomorrow, not after tomorrow, not in a week, two, three, but today. Therefore, as in the previous paragraph, there should not be any stocks, bonds, real estate, or anything like that. Their implementation usually takes a lot of time. And where have you seen force majeure, which would agree to wait at least a little.
“Not be easily accessible” means that your funds should not be under the mattress, in the bank, in the cellar, on a bank card or any other such nonsense. You must choose a storage location such that several steps need to be taken to get to this place, and by the time you get there, you will change your mind about spending your savings.
Based on the above, we can safely offer the most accessible way for all people to store their savings, which is opening a deposit in a bank. This way you will not only save your money, but also receive a small interest on it, which will protect it from inflation.
True, there are also requirements for choosing a bank deposit:
- firstly, the selected bank must be reliable with a share of state capital;
- secondly, since your goal is to save money, the deposit in the bank must be replenished;
- and thirdly, a mobile and Internet bank must be connected to your deposit, so that in case of unforeseen circumstances you can quickly act and transfer your funds wherever you need.
How to create a financial airbag
We found out what kind of airbag there should be. Now we can talk about how to create it. And for this it is necessary to clearly and firmly follow a number of necessary tips without any concessions.
- Always, regardless of when and how much you received income, at least 10% of this income must be put on the airbag. Ideally, it should be close to 40 - 50%. The bigger, the better. 10% is the minimum, the absence of which you will not even feel.
- Regularly set yourself days in which you absolutely do not spend money. And put this amount that you could presumably spend into your reserve account.
- Analyze your financial expenses and reduce your expenses, and replace some expenses with less expensive ones.
- Find a way to increase your income without increasing your expenses. Set aside the amount of increased income for a safety net.
- Come up with a way to save your money. For example, take advantage of various promotions, sales, cashback, cards like Halva from Sovcombank and all that kind of nonsense. Put the money you save in various ways into your reserve account.
- Also put aside the bonus you receive, a salary increase, or money from additional earnings into your airbag account.
Here I would also like to note that the above requirements are essentially just advice, which, if you use, you will definitely, in the very near future, create a financial airbag of the size you need. And so, a person, due to his individuality and life circumstances, can independently come up with ways to create an airbag. The main thing is that these methods are regular and mandatory.
An example of creating a financial airbag
For even greater clarity, let’s look at the creation of a financial airbag using a specific example.
Let's assume that your salary is 30,000 rubles. The amount is small, but, unfortunately, this is exactly what most of our Russian citizens have. Now let's get started:
- We determine the money you need per month in order to live the way you are used to. If you do not accumulate debts, then it will be the same 30 thousand rubles..
- We determine the duration of the airbag, that is, how many months we will create it. Let's take the optimal size, which is six months. If you want to create it for a longer period, then take more months into account. It is even better. More is possible, less is not possible.
- Let's calculate the amount of our airbag, which will be equal to: 30 thousand rubles. x 6 months = 180,000 rub. This will be the amount you need to save.
- Now we can start looking for ways to create our financial safety net. Each person will have their own, depending on his individual characteristics, life circumstances and capabilities.
- Once you have come up with and thought through all the ways in which you are going to create an airbag, be sure to bring them to life. And we follow them clearly and firmly without concessions.
- A mandatory requirement for fulfillment should be that from each of your income and cash receipts, you must first set aside at least 10% of this amount. Only after this can you start spending the rest of the money. It’s even better if you save 25–40 percent. More than 10% is possible, even better, but less is absolutely impossible. This is a mandatory condition that must be fulfilled under any life circumstances, and which cannot be appealed.
Something like that. Now you can start creating your own airbag by simply submitting your details.
What is a family financial airbag?
I'll start by defining a financial airbag.
A family’s financial safety net is a reserve of funds not used for the family’s usual needs, sufficient to support the family as usual for six months or more.
A financial airbag is accumulated and formed for use in the event of crisis events occurring in the family.
For example, a family was left without a main source of income, one of the parents lost their job, became seriously ill and cannot work. Or one of the relatives has died, and funds are needed for funeral services. Or there is a fire or flood in the house where the family lives, and funds are needed to repair the damage.
