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I blog about emergency fund from time to time.
I have mentioned having a float at times too but not as often as my talks to myself on emergency fund because I didn't think it was as important.
Why?
Well, know it or not, all of us have a float.
Just like an emergency fund, it just varies in size for each of us.
Not everyone has an emergency fund and I suspect most don't have one or an adequate one.
However, I suspect that, unless extremely financially constrained, all of us have a float.
Now, I am not using the word "float" very strictly like a finance professional would.
In finance terms, a "float" is money that appears in two accounts at the same time as the money is being transferred from one account to another.
What I refer to as my float has a similar flavor but with a larger temporal window.
My float is money which I have on hand which is farther away than "convenience cash" which is money I keep at home and, therefore, nearest to me.
However, money in my float is nearer than money in fixed deposits.
Yes, it is money in my savings and current accounts.
My float is really a form of convenience cash but just not as convenient.
Although not as large a sum as my emergency fund, the float is still around $100K at any one time.
The float exists so that I have ready funds to make routine monthly and quarterly online payments or whenever they are required.
The float also exists to honor monthly and yearly GIRO payments which I have in place.
So, the money in my float is money which has been earmarked for various payments to be made in the future.
Yes, the float is to fund consumption.
Admittedly, my float could be smaller as I am not excessive by most standards when it comes to consumption.
However, I was serious when I said I was mental on multiple occasions.
Buffers allow me to sleep better at night.
Having a larger float gives me another buffer.
What this also means is that in case of an urgent need for a relatively large sum of money in my family, I have money which can be deployed immediately.
However, my float alone isn't sufficient as an emergency fund which must be able to cover many months (and in my case, it is 24 months) of expenses for my whole family in case our cash flow goes negative.
Anyway, to be used in an emergency is not the primary purpose of my float but it could be used to plug sudden one off financial gaps.
My float is really wearing many hats.
So, the term "float" is pretty apt as the money can go wherever it is needed especially when it has a comfortable buffer.
Why am I blogging about this if I thought it wasn't important before?
I was thinking about random stuff and quite suddenly felt like doing it.
I just thought "why not?"
If anyone should ask me what I meant by having a "float" in future, I would have a blog to point them to.
I hope I am right when I assume most people have a float just like me and that I am not being more mental than usual.
Do you have a float, oppa AK style?
References:
1. Emergency fund.
2. Convenience cash.
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