Murphy's Repellent

We’ve all heard of Murphy's Law? Whatever can go wrong will? But have you heard of Murphy's repellent?

If you drop a slice of toast on the floor it always falls butter side down, why? I remember being 17 years old, just got my brand new (well, new to me) VW Polo, and I then spent more money on a new stereo and 18inch allow wheels than the car actually cost me. Within an hour of having my new rims fitted I found a pothole in the road big enough to live in, and yes, I cried the entire way home. I had a huge chunk taken out of my low profile wheels (that were way too big for the car to be fair).

This is Murphy's law. The view of what can go wrong, will. It coined its name in the 1940s from a US Airforce General called Thomas Murphy but that’s not important. You know what it is.

But have you heard of Murphy's repellent?

Before we go into this I want to talk about, what for me, is the foundation of any form of financial plan, and it’s the emergency fund. 

What is an emergency fund?

An emergency fund is a pot of cash that is readily available, should old Murphy catch up with you. It’s there incase the boiler goes, your car breaks down, a medical bill you weren’t expecting - unexpected costs. It stops you having to rely on credit cards or family members to bail you out. Because, guess what? You need to pay them back and more often than not, with high interest, especially if we’re talking credit cards or overdrafts.

How much should it be? I usually recommend 3-6 months expenses, depending on your circumstances. Sound a lot? It is. But imagine getting laid off from work tomorrow, this gives you breathing space to find your feet again and not to rush into the first crappy job that comes along, because you need to put food on the table.

Keep it out of your main current account. Open a separate bank account for the home of your new emergency fund. Somewhere you can access instantly but also somewhere you don’t have a debit card for. And here’s why: In this day and age you can get internet access, EVERYWHERE, so within seconds if you need to you can transfer money from your emergency pot into your main current account BUT it means you have to consciously do it.

Do you really need that 82 inch flat screen UltraHD 4k TV. Whats wrong with that 75inch TV you already have. This isn’t what your emergency fund is for. An emergency is NOT Christmas, it’s NOT your annual holiday, it’s for real emergencies, such as when your 4 year old pours a full bottle of milk down the back of the sofa (true story).

And here’s where Murphy's Law comes in.

We’ve all been there, times are a little bit tough, you don’t have an emergency pot in place and everything seems to go wrong. I first found out the hard way about the need for an emergency fund when I was 17/18.

I'd rented a flat, it wasn't the nicest place, actually, that’s an understatement, it was a right shit hole, but I got a decent deal on it. I’d been in this flat for 3 or 4 month and i'd never received an electric bill but foolish young me hadn't even noticed.

Christmas came and went, and as January arrives, I’m skint. I’d spent way too much money going out and throwing silly after parties at my new crib. And then, Bash, Happy New Year Joe. On the doorstep drops the electricity bill - £400.

I didn’t have anything, actually, I had less. At the time I was earning not more than a grand a month after tax and my rent was £450. There was no way I could afford it, but very luckily for me my Mum came to the rescue and paid it. Now I don’t know if it was a success for her or whether it backfired but 2 months after I was back in my Mum and Dad’s spare room.

But on a positive, did I learn from my experience, ha ha ha....no. I was a teenager I already knew everything, couldn’t be taught anything, and made plenty more mistakes like that along the way. And got bailed out plenty more times along the way from my ever forgiving Mum and Dad.

Time moves on and a few years later I find myself living with my soon to be future wife in our home, a home where the boiler has just broken down and the bill is set at £4,000 - just before we're about to start looking into wedding dresses and venues and cakes (not the cheapest) and it was on this occasion I decided we needed our very own emergency fund.

It took us almost 2 years to be fair to get it to the amount where we are now comfortable, but now if anything goes wrong we have sufficient savings in place. 

And you know what, since we’ve had this money there, a lot less has gone wrong, or at least it seems to have, I follow a podcaster in the US called Dave Ramsden and it’s he who coined the term, Murphy's Repellent. Unfortunately I can’t take that one for myself.

The more prepared you become, the less prepared you have to be. Yes we’ve had to buy the odd white good again when the Washing Machine breaks or the fridge has a meltdown (literally). But the money’s there, so it’s not an issue and zero sleep is lost worrying about it.

Long story short, an emergency fund insures against life’s unexpected expenses. It gives you peace of mind, nobody wants to live month to month, rent cheque to rent cheque or 1 car breakdown from not being able to get to work. 

Next week i'll detail the 4 easy steps to getting yours set up easily.

Thanks for reading,