I was reading some articles today about how having a decent sized financial safety net can play a big psychological role in determining how well you manage money. It’s like saying, if you had a safety net of $10,000 then you are apparently more likely to not want to splurge compared to if you had say $1000. From what I gather, the idea is supposed to be that if you have very little money within your safety net funds you are inclined to say “forget about this” as the amount seems too little for you to care about in maintaining. Therefore, you are inclined to just spend it.
On the flip-side, some say if you have a lot of funds then you are more inclined to want to make sure that high number doesn’t dip because it seems like a worthy number to maintain. This is kind of tricky I feel as I have met plenty of people who would blow through a $10,000 account with complete neglect for any kind of long-term financial planning. Like in that case it takes something more than simply having a high financial safety net.
I do agree with the notion of not wanting to drop below a specific high figure though as even for myself it makes me want to find ways to increase it. Ultimately, that means it encourages me to want to manage my money wisely.