Ndubuisi 'Andy' Egwim argues an emergency fund is a psychological tool that lets you make calmer decisions and move faster toward financial independence. During the 2008 crash he sold early out of fear, but later with a safety net he could buy when prices dropped instead of panicking.
If you have emergency fund is a psychological thing, okay? Because part of the thing that helped me to get to financial independence quicker was that when the market was down, I was able to buy. When I was able to take advantage of market, deep stock market, I didn't do it in 2008. In 2008, I was busy celebrating that I didn't lose any money that I sold before the market crashed. Now, looking back, I thought I was a bit foolish then, but I was inexperienced by then. I'd only been investing for like three to four years and that was my first market crash. But basically, if you've got an emergency fund, you've got some safety net. You're not doing things out of a point of fear. And that way you can actually coolly analyze situations because you know that, okay, if the market goes down, it doesn't mean I don't have any fallback plan or I'm going to lose everything, okay? Another thing about emergency fund, again, it's all about psychology. Amara, you've read Dr. Peace. Amara, you've read the Psychology of Money. Money is not just numbers and mathematics. A lot of it is psychology. So I usually say, okay, Having an emergency fund will ensure that not everything becomes an emergency.
