As developers, we know that backups are important. We backup our computers, databases, servers, and use version control. Everything is backed up for that “awe crap” moment that is inevitable.
This mindset is so engrained into our workflow we don’t give it much thought. It’s just the way it’s done.
Backups shouldn’t end at work. This same methodology should be applied to your money. Having an emergency fund, with money you only use in a true emergency, is vital to life. Just as we plan for failure for our code, life is going to have hard times and it should be planned for.
Dave Ramsey recommends $1,000 as the first step. Then build up to 6 months of income after you pay off debt. Other advisers have differing views, but they all agree you, at least, need $1,000 to $2,000 at a minimum.
In the tech world, we have a lot VC money floating around, lots of startups needing developers and paying top dollar. If you enjoy working in this area, then you need to plan for failure even more. You are trading huge risk for a huge paycheck. Plan accordingly. At minimum save 6-8 months of income for when the company fails.
Personal finance is 80% behavior and 20% head knowledge Dave Ramsey
Developers are some of the smartest people I know and are very analytical, yet some still struggle with debt.
I remember one of my first college courses was on personal finance and for our first project the instructor had us do the simple task of changing the way we put toilet paper on the roll. Apparently, the way it’s put on is a very personal matter and changing to the other way is hard. It made an excellent example of how much of a struggle changing your habits can be. So many people complained about that exercise.
It just proves changing behavior is hard, real hard. But that’s what it takes to change habits.
Eric L. Barnes 
Hello Eric,
Many — if not all — countries in the European Union have social security systems that allows you to get some money every month from the day you loose your job till you find a new one. Usually not a lot of money, but generally enough to cover your usual expenses (rent, food, etc.). Of course there are some requirements to get this money, such as proving you’re actually looking for a new job, and the amount they give you can slowly decrease every month, but you get the basic idea: it’s a system that the country built to help people face the unexpected loss of their job. Kind of a backup plan for unemployed citizens (you don’t get anything if you choose to quit your job, it has to be unexpected).
All of this to say that, while your advice is obviously good, it may not apply with the same relevance to everybody since it is mostly relevant, I guess, to US citizens.
That said, even if I live in the EU, I still do have an emergency fund. Kind of a second backup in case the first one is not efficient enough 🙂
LikeLike
Thanks for the comment. Yes, the US has something like that, but it only covers a percentage of income and only lasts so long. I always consider losing the job to be worst case scenario and I was trying to touch on the fact that many people live paycheck to paycheck so if they have a bad month, maybe the refrigerator and washing machine both break at the same time, they have enough set aside to not be forced to add it to a credit card. Basically spending what they don’t have.
LikeLike