A while ago, I decided to work towards certain financial goals in order to have a buffer for bad times. Through some friends and acquaintances, I’ve seen very clearly how difficult it is to get back on your feet from a financially challenging situation. Being poor is incredibly expensive. Here, the relative impact on the basis for existence is particularly visible. If I overlook a bill and have to pay a 5€ reminder fee, I don’t even notice it in my daily life… not even a Starbucks coffee… In a difficult financial situation, this can mean a day without food.
This extends to dimensions such as “I can’t get an account with a bank and have to find an employer who can pay me with a physical wage packet,” to “I am forced to go to jail because my wage garnishment takes so much money that I can no longer afford the DB (Deutsche Bahn) ticket and I can’t possibly pay the court fine for ‘fare evasion’ in addition.”
Being poor is very, very expensive and incredibly unfair, and you are subject to massive arbitrariness.
One of my biggest fears is to get into such a practically hopeless situation, from which there is very rarely an escape.
So I’ve decided to save a certain amount of money that can keep me afloat for a while and afford investments like “I need a car for this job because the job is in the countryside.”
I thought that about 50,000€ should suffice to survive pretty much any financial blow, at least in the short and medium term.
Note: This is purely an arbitrary estimate of mine, a gut feeling. I think this value is very dependent on the risk you carry in life. So, for example, “Do I absolutely need a car”, “Is my house well insured”, “Do I have a child”, “How many long-term contracts do I have?”, etc. These are all risks that need to be cushioned in the event of job loss or the loss of work capacity. You should plan at least enough money so that you are able to reduce your expenses to fit into basic security, and that can take quite a long time, as with expensive mobile phone contracts, for example.
Inflation
Now we have the problem that the counter value of, for example, 50k€ decreases with inflation. Since we don’t just set a number and that’s enough, we’re essentially saving for performance that is available to us in case of need, we want to include inflation in these 50k€. After some searching, I came across the “HICP(2005-06)” index, which indicates the value development of the euro in relation to 06.2005. Today, on June 8, 2022, the last determined HICP is at 136.8. So we have to provide 136.8% of the money value of 2005 to get the same performance. To make the calculation faster and to have a simple, good source for the HICP, I built a small tool and pre-calculated some values: https://i5heu.github.io/HICP-calculator/index.html
50k€ in 2005 are today 68,400€.