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[Yours truly is still hungover gathering his marbles from this weekend’s financial nerdfest, so please enjoy a great article today by my blogging friend Matt Becker of Mom and Dad Money. And by “killer,” I mean the opposite of that since, ahem, this post is all about being invincible. Take it away, Matt!]

How would you like to be invincible?

Okay, maybe not truly invincible in the video game sense of the word as even Superman occasionally meets his match, but you can be financially invincible.

You can set up a system where anything life throws your way is fixed faster than a speeding bullet. Where you can leap financial mishaps in a single bound. You can even become so invincible that you’re able to fearlessly chase your dreams.

This isn’t a video game so there are no cheat codes or shortcuts. Invincibility takes some good old- fashioned time and hard work. But it is possible. With the right financial system in place, you can be invincible.

Here’s how I do it.

Step 1: Extra cash in checking

My checking account is the heart of my financial system. When money comes in it’s my checking account’s job to pump it out to the right places. A little over here for bills. A little over there for savings. And of course, a little can stay right here for some fun.

Keeping my checking account healthy is the first step to invincibility. As long as it has enough money to do its job, the rest of my financial system will keep humming right along.

I like to keep a little extra cash in my checking account, above and beyond whatever comes in from a paycheck or side hustle, just to make sure I never run out. $1,000-2,000 usually does the trick. With that buffer in place, I almost always have plenty of cash to handle even the spendiest of months without disrupting the rest of my system.

Step 2: Extra cash in a linked savings account

Just in case I actually DO manage to blow through that buffer in my checking account, I have a small savings account linked to it that would automatically transfer money over to handle the shortfall. And because I use an online bank instead of one of the money-sucking big national ones, this transfer would happen completely free of charge. (I use Ally for my banking, but there are plenty of good online banks that don’t charge you ridiculous fees.)

Now, you might ask what the point of this savings account really is. Couldn’t I just keep an even bigger buffer in my checking account and skip this step?

I could, but I like having the savings account for two reasons:

I can earn a little more interest, and When the money is out of my checking account, I’m less likely to spend it on something silly. True invincibility requires me to guard against internal bad guys too.

Step 3: Irregular expenses made regular

In my pre-invincibility days, I had a sweet-looking budget that would constantly get thrown off course by irregular expenses. Things like car repairs, doctors visits and out-of-state weddings weren’t happening monthly like my other expenses, but they were happening often enough to cause problems when I wasn’t prepared.

I needed to make a change. So instead of just dealing with them when they came up, I decided to make them a regular part of my monthly plan.

For each of the most common types of irregular expenses, I now automate monthly savings into a separate account dedicated to just that purpose. Then when I actually have to spend money on one of those things, I just take the money out of my dedicated account.

Irregular expenses handled. Budget saved. Invincibility growing stronger.

Step 4: Fully-stocked emergency fund

Those first three steps will protect me from any normal kind of financial mishap. If I overspend one month, I’m covered. If my car breaks down, I’m covered. If I want to travel to see my family up in Boston for Christmas, the money will be in my “travel” account.

But for the really big stuff, the kinds of things I hope never actually happen, I have an emergency fund. This is money that never gets touched unless there’s a real emergency like a job loss or extended health issues. In fact, a big reason for all the buffers above is to make sure I don’t have to touch my emergency fund for the small stuff. I need to know that the money will be there when I really need it.

But there’s more to an emergency fund than just protection. One of the really cool things about invincibility is that it not only saves you from bad stuff, but gives you the opportunity to try new things.

I lost my job last November. It was a scary thing to face, but because I had spent the years to build up all these buffers, I had options. And instead of using my emergency fund to keep me afloat until I could find another job, I used it to jump head first into self-employment and start my own business. I could take the risk because my emergency fund meant that it wasn’t really all that much of a risk. The financial protection was there. All I needed was the guts.

THAT’S the kind of invincibility that makes this stuff really fun.

Step 5: Rocking that insurance

Despite all of the above, there are some things life could throw my way that I couldn’t handle with my own savings. So to make myself truly invincible, I buy insurance.

I have health insurance to handle any really big medical bills, especially those that might be ongoing.

I have life insurance to make sure my wife and kids would have the financial resources they need, even if I’m not around.

I have disability insurance in case health issues keep me from working for an extended period of time.

And I have liability insurance in case I accidentally injure someone and need to pay for the damages.

These are big, worst-case scenarios that would be difficult or even impossible for me to handle right now with my own savings. But if they ever came up, my insurance would be there to provide that last layer of protection.

Step 6: Bulletproof habits

This last one is a little different, but it’s actually the key to this entire system.

Our habits are the things we do every day without thinking. Biting our fingernails. Getting out of bed on the same side every morning. That facial expression we make when we’re trying to remember something.

Our habits are just a part of who we are. They’re effortless. And because they’re effortless, every habit either makes effortless progress towards our goals or effortlessly works against them.

The good habits I’ve created over the years made it possible to build all these buffers. And those same good habits keep the system on track even when things go wrong.

Because I do things like make my own lunch, spend family time on free activities like the park and the beach, and negotiate almost every single one of my bills, I have fewer financial obligations and more money available to save. And because I automate that savings, my invincibility grows month after month whether I think about it or not.

Good habits work together to make effortless progress. That’s how you become invincible.

What are you waiting for?

Being invincible won’t remove all your worries. I still worry about things like saving for retirement, whether my business will grow like I want it to, and what our budget will look like as our kids get older.

But one thing I never worry about is whether we’ll have the money to pay the bills next month. Life can do its worst and I feel confident that we can handle it.

That’s invincibility.

And you can do it too. All it takes is time and dedication.

——-

Matt Becker is the founder of Mom and Dad Money, a personal finance blog, and fee-only financial planning practice dedicated to helping new parents build happy families by making money simple. His free time is spent jumping on beds and building block towers with his two awesome boys.

PS: Matt’s offering his New Family Financial Roadmap eBook for free to any Budgets Are Sexy readers interested in it. It’s all about the most important financial aspects of starting a family, and you can learn more/download it here: momanddadmoney.com/budgets-are-sexy

[Photo cred: Gareth Simpson]

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