Sunday, July 12, 2009

Before We Need It

When Noah's buddies were hassling him about building a boat in the middle of the desert it must have been hard to carry on with the construction. Finishing the boat was the right thing to do though.

The right time to get ready for problems that may come your way is before you need to. Most of the time you don't know what those problems are going to be, and for those sorts of problems, you need an emergency fund.

Spending less than you earn is boring, but it's the solution to your basic financial problems. Unpredictable events happen, and that's why you need an emergency fund. Typically 3-6 months of expenses is a good number to shoot for.

Keep this in a high interest savings account. Someplace removed from easy access so that you won't be tempted to spend it, but not someplace locked away where you can't get your hands on it on short notice. The emergency fund will help you ride out the unpredictable problems that life will throw your way.

The predictable problems we face are something else entirely.

Suppose you were able to predict that you want to retire someday. At that point you're going to need to spend your savings. The smart move would be to put money away so you have something when you need it.

Suppose you were able to predict that fossil energy was going to be scarce and expensive in the future. The smart move would be to transition the entire economy away from fossil fuel as quickly as possible. Jobs in fossil energy would turn into jobs in clean energy.

Suppose you were able to predict that anything more than a two degree Celsius change above preindustrial levels would be catastrophic to the biosphere. The smart move would be to avoid that change, especially when it is shown that business as usual is more costly than taking action to solve the problem.

Keep an eye on Canada's involvement in global climate change talks, and see if Canada's position, which is drawing international scorn, speaks for you. We've lost our chance for 'before we need it' international action on climate change. The scientists are terrified. We need action now.

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