The necessity of emergency funds
A spring survey released by the National Endowment for Financial Education found that 88% of Americans said the pandemic is causing stress on their personal finances. Chief among those stressors was not having enough saved for emergencies. That’s not surprising, considering that before COVID-19, an alarming number of people lived perilously close to the financial edge. A Federal Reserve report found that 4 in 10 adults would have difficulty covering a $400 unexpected expense.
The sudden onslaught of the pandemic and its ripple effect throughout the economy have underscored fragilities in our financial lives. Chief among those is the inability for many Americans to adequately fund an emergency reserve account. While some live paycheck to paycheck, others have the wherewithal to save but for some reason, the boring old rainy day fund never gets the love that it deserves. The saving rate surged to 33% in April, the highest on record; perhaps now is an ideal time to start, augment or replenish that fund.
I have heard from many of you, wondering if my advice has changed regarding emergency reserve funds — the answer is no. I recommend that workers keep 6 to 12 months of living expenses (1-2 years if you are already retired) in a liquid, accessible cash-equivalent account, like a savings, checking, money market or a short-term (less than a year) certificate of deposit. I do not consider access to a home equity line of credit or loan as an emergency fund, nor do I believe that a taxable brokerage account that is fully invested in stocks, bonds or other financial assets can serve this purpose. I am talking about plain vanilla, folks!
Early in the crisis, many of you wrote to ask whether emergency reserve funds at various financial institutions were safe. Now that your rational brain is ready, here’s a primer/reminder about the Federal Deposit Insurance Corporation (“FDIC”), every saver’s favorite backstop. The FDIC is an independent agency of the government that protects assets, including savings, checking, money market deposit accounts and CDs, up to $250,000 per depositor, per insured bank, in the unlikely event of a failure. The agency proudly boasts: “Since the FDIC began operations in 1934, no depositor has ever lost a penny of FDIC-insured deposits.”
For more on how FDIC coverage is applied to individual, joint, retirement and business accounts, go to fdic.gov, and to determine if your bank is FDIC-insured, use the FDIC’s BankFind tool, which provides detailed information about all FDIC-insured institutions, including branch locations, the bank’s official website address, the current operating status of your bank, and the regulator to contact for additional information and assistance. One important note: The FDIC does not cover investments or life insurance products, even if they are sold through an arm of an FDIC insured bank.
Credit unions provide similar FDIC-like coverage through the National Credit Union Share Insurance Fund, but a different entity backs up money in a brokerage account: the Securities Investor Protection Corporation (SIPC) provides limited coverage in the event that the firm goes broke. SIPC covers up to $500,000, including up to $250,000 for cash equivalents. However, SIPC does not cover unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, currency and interests in gold, silver or other commodity futures contracts or commodity options.
I love my emergency reserve fund and want you to love yours, too, even when the economy is seemingly strong and it feels like a “waste” to have the money earning rotten interest. When the next crisis comes, either systemic or personal, you will be happy to reacquaint yourself with the beauty of cash.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.
An investor isn’t interested in your pitch. A distributor won’t stock your products. A potential customer says “no” to your proposal. For most entrepreneurs, hearing “yes” is the exception, not the rule. The small-business landscape is littered with rejection.
That’s what makes perseverance paramount: dealing with failure, dealing with adversity, overcoming roadblocks and challenges, and staying the course can be the only things that separate success from failure.
But that doesn’t mean dealing with rejection is easy. Brain scans show that people who get rejected experience a physiological response similar to processing physical pain.
Getting rejected? It physically hurts. Especially when your goals and dreams are at stake.
Fortunately, it’s possible to learn to take “no” in stride and keep pushing forward. Just ask Adam Grant, the Wharton business school professor, best-selling author and host of the popular podcast “Worklife.”
“The good news is that we can learn to take rejection in stride,” Grant says. “Take salespeople: They get rejected constantly, and psychologists find that the ones who stick with it are the ones who learn not to take it personally.”
Start with the relationship
One way to cope with rejection is to blame the other person.
My publisher turns down my idea for my next book? Big mistake; they just don’t get it. A conference decides not to book me as the (virtual) keynote speaker? Big mistake; they’re definitely missing out.
But while shifting the blame to the other person may help me feel better in the short term, it’s a terrible way to deal with rejection. My book idea might actually be great, but the market timing could be wrong. My presentation might be great, but totally wrong for the conference theme.
I’m not to blame. They’re not to blame. The fit — as of this moment — is to blame.
When you “blame” rejection on the relationship instead of on one person — either you or the other party — you’re much more likely to keep trying. You’ll see the problem as temporary, not final. You’re much more likely to look at ways to improve what you offer. To improve the mutual fit. To improve the timing.
To consider what the other person needs — not just what you need — so hopefully the next time the answer will be yes.
And stop taking it personally
Another approach to dealing with rejection, Grant says, is to remember that failure in one area of your life in no way reflects your overall self-worth.
I didn’t land the book deal, but that doesn’t mean the entire me — the husband, the father, the friend, the writer, the speaker, the fitness enthusiast, etc. — got rejected. My idea got rejected.
Taking a step back to focus on your overall sense of self minimizes your physiological response to rejection and stress. (Reflecting on your overall selfworth before you walk into the room and put your ego on the line definitely helps as well.)
Just as one success doesn’t define you, neither does one failure.
What does define you? How you respond. And whether you keep trying.
But don’t move on too quickly
We all try to learn from our mistakes and put them behind us. But sometimes you shouldn’t move on too quickly.
When I asked Grant for an example of a person who had worked through rejection, he chose Sarah Robb O’Hagan . At the start of her career, her dream was to work for Air New Zealand. She applied for a marketing internship, took a number of tests and was turned down because she didn’t score highly enough.
“But Sarah refused to take no for an answer,” Grant says. “She launched a marketing campaign to get hired. It started when she called the recruiter and asked, ‘Could I come and spend just 15 minutes talking to you, so I could learn from why I was not selected?’ She got the meeting, did a lot of research on where she could add value, and managed to convince the recruiter to give her an interview with the hiring manager. In the end, there were only six slots, and they had already been filled.”
But the company decided to create a seventh slot for Robb O’Hagan. She worked for Air New Zealand for six years, and then went on to become a marketing executive at Virgin and Nike, the president of Gatorade and Equinox, and the CEO of Flywheel. She’s now the CEO of Exos.
“So often, we take a rejection as a sign that the door has been slammed and locked,” Grant says. “But in some cases, it’s been left ajar. And by failing to give it a little push, we shut it on ourselves.”
Sometimes “no” is final. But sometimes “no” creates an opportunity to find out where you fell short, what you could do differently, or how you could develop a better fit with the people who turned you down.
Maybe the problem isn’t you or what you provide. Maybe the problem is a simple lack of understanding, on both sides, of how you can meet each other’s needs.
The best way to deal with rejection
While it sounds counterintuitive, the best way — the best long-term way — to deal with rejection is to succeed. Not because you’ll never have to face rejection, but because success gives you the confidence to take an occasional or even frequent “no” in stride.
Improve, and you’ll feel more confident. Gain skill, and you’ll feel more confident. Celebrate and enjoy success, however small, and you’ll feel more confident.
And that feeling of confidence will spill over to other areas of your life. Achieve a level of success in one area of your life, and you’ll feel better about other areas of your life, too — even the things you don’t do particularly well.
That knowledge will allow you to stay the course in the face of short-term rejection, to realize that one shortcoming does not define you, and to realize that if you’ve learned to do one thing really well, you can learn to do many things really well.
All you have to do is keep trying.