What if I told you there was a way to boost your IQ, strengthen your self-control, think more clearly and even improve your sleep?

Maybe you’re thinking it’s exercise. Or some new miracle med. Whatever it is I’m flogging, it can’t be as good as all that.

But it is.

It’s a cash cushion. An emergency fund. It’s saving enough money to absorb the inevitable shocks that come along in all our lives. This could be a health scare, a natural disaster or even when your mechanic gives you the bad news that your car’s tyre doesn’t just have a nail in it – you need a whole new one (which is what happened to us last week).

When our budgets are running tight – and let’s face it, lifestyle inflation probably guarantees that they are – what we need is some slack.

Without it, we are all just one unexpected event away from going into debt. Or going without.

When times are scarce

There has been ground-breaking research in recent years on what it feels like to not have a cash cushion. This goes way beyond just counting the number of people who don’t have any buffer at all. Rather, these studies have focused on what not having any slack in our budgets – and in particular the feeling of not having enough – does to our heads and how well we think.

Turns out that going without an emergency fund is not just risky – it’s debilitating. Even if a disaster never occurs, living so close to the edge means we must cope with being loaded down with the stresses and anxiety that come with knowing that something mighthappen.

If times are tough and we are preoccupied with money worries, we are more likely to be more impulsive, give in to temptations, muddle our thinking and get even deeper into the money mire.

One study even showed that increased money concerns caused a fall in people’s intelligence by 13 or 14 IQ points and lowered their ability to think clearly even more than if they had gone a night without any sleep. Apparently we get ‘dumber’ when under financial stress – our ability diminishes because of our tight circumstances.

Take that stress and feeling of scarcity away, however, and our head space suddenly frees up and we have the mental bandwidth once again to think clearly.

You owe it to yourself

Of all the companies or people you owe money to each month, you owe it most to yourself to build an emergency fund. That’s why here at Sorted we’re all for paying yourself first – before anyone else – with an automatic payment to a savings account each payday. It takes all of 15 minutes to set one up online, and if you ‘set and forget’, it will be ‘out of sight, out of mind’, slowly just building up in the background.

You’ll find that putting away even just 1% of your income can grow into a sizable amount. The goal is to set aside enough to cover three months’ worth of expenses just in case.

And even if you never need to tap into your emergency fund, simply lifting that heavy mental load of anxiety that comes with money worries will work wonders. If you cut yourself some slack, studies show that you’ll be smarter, more in control, thinking more clearly.

And hopefully sleeping better, too.

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