The Psychology of Money
Room For Error
Blackjack and poker players know they are dealing with probabilities not certainties.
The best plan is to plan for things to not go according to plan.
“Margin of safety—you can also call it room for error or redundancy—is the only effective way to safely navigate a world that is governed by odds, not certainties.”
“The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside. There is no margin of safety that can compensate for the risk.”
It is impossible to prepare for or anticipate what you cannot envision.
Minimize the impact of failure by avoiding single points of failure.
“The biggest single point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.”
Rainy-day funds are a good idea: save for things you cannot anticipate or predict.