Do you want to feel like you have a million dollars?
In a recent Longview podcast, psychologist Andy Reed mentioned that having an emergency fund of $2,000 gave an equal amount of happiness as having $1,000,000 in net worth. Apparently, we human beings are wired in such a way that we experience a strong feeling of well being when we have resources earmarked as “for an emergency.”
Yes, mathematically one million is 500 times as much as two thousand, but it’s equal in terms of how our brains perceive happiness.
If you are interested in the above or other aspects of behavioral finance, the podcast, its show notes, and transcript are available at https://www.morningstar.com/podcasts/the-long-view/c1ecfb7e-23be-444d-bd74-2f8c6a139a5e.
And here’s hoping that you have an emergency fund but no emergencies!