Section 2: Building Your Financial Foundation
Stress is the thief of peace, but a good night's sleep is the guardian of your health and happiness.
The secret to this section (Building Your Financial Foundation) is finding your S.W.A.N. Number—what helps you Sleep Well At Night.
We know stress is not good for anyone’s health, and there will be many examples and suggestions given for each step. Ultimately, though, deciding the best choice for you will come down to what helps you “sleep well at night.” This method can help you determine the ideal amount for your financial safety net, focusing on peace of mind.
How to find your S.W.A.N. Number
Begin by saving for your cash emergency fund until you reach a point of discomfort. This is your S.W.A.N. number for your cash emergency fund. Keeping enough cash on hand for emergencies, but not so much that it would be devastating if it were lost, destroyed, or stolen.
Next, build your fully funded emergency reserve in an interest-earning account with quick access, but be mindful of risks, such as losing value to inflation and the reliability of your banks. Save until you reach a point where you feel secure but not overly exposed to potential risks such as value loss, potential bank failures or insolvency, or FDIC/NCUA limitations. This is your S.W.A.N. number for your fully funded emergency reserves.
This approach can be applied to various aspects of your financial portfolio, guiding your decisions on diversifying funds across assets, banks, and even preparing supplies.
Note:
If you share finances with a significant other and are unable to agree on your S.W.A.N. number, usually the one who wants to save the most wins, as the stress of having too little saved is generally greater than the stress of having too much saved. Be sure this is a discussion you are having together, not just once, but regularly. Financial peace can be more than just numbers—it’s about both of you feeling seen, secure, and supported.
Keep this in mind as you work through this course. However, try not to get hung up on any step. It’s okay to begin with one number, then move on to the next few steps, as you can always come back and increase any step later, if desired.