Maybe some folks here already have a strong financial structure or consistent income that allows them to invest freely and not worry too much about these breakdowns.
These breakdowns are way more important when we are living them and/or practicing them. There are some guys who contribute to some of these threads who seem to be talking in theory and not actually practicing what they are writing about. So surely when guys have experiences, they can really start to engage with the theories and even tweak their practices from time to time based on their discussions in threads like this one. Another thing they can use some of the categories differently, but then maybe they come to realize that what they had been doing does not really fit within the category that they thought that it did.
Some times we might put our system in practice, and then we might realize that every month or maybe every couple of months, we are getting stressed out because some portion of our reserve funds is falling down to below $1k, and we had noticed that as long as it stays above $1,500, we don't really feel stress, but if it starts to go below $1,500 we get a bit nervous, but if it goes below $1k then we start to get really nervous. .. so then after we experience this for several months in a row, we decide that we are going to have to up our numbers by somewhere between $300 and $500 in order to start to feel more comfortable. At first we decide to put it at $300 more for the next month or two and then if that resolves the issue, then we can leave it at that position for the future, but if we are still feeling more stress than we want to feel, then we are already prepared to increase it by $200 more to put it at $500 more from the original amount. So in some sense, we have a combination of finances and emotions that are helping us to figure out our comfort level and balance.
But for others still trying to establish themselves or build towards stability, I think it is important to treat these intentionally. Like, someone can be DCAing into Bitcoin, have an emergency fund, and still be setting aside savings specifically for launching a business or going back to school or something else important. I think separating them mentally helps a person stay organized and avoid being forced to make poor decisions under pressure.
I think that you are correct in terms of describing the situation like that, and if a person has a goal to build his emergency funds up to 3 months, he might also have side projects that are going on that he needs to fund, like you said. It might not matter so much what we call these various funds, yet he might also end up getting himself into trouble if after a year or more of buying bitcoin, he has build his bitcoin investment up to 3-4 months of his expenses, and his emergency fund is still only 1 month, but he has various savings that he ends up spending for their designated purposes, so then that savings cannot serve as an emergency fund either.. Let's face it if push comes to shove, and you spend all of your emergency funds, then your savings might be the ONLY thing that is left and stopping you from spending your bitcoin, so it is up to you to figure out your priorities and to decide are you spending your bitcoin or are you spending from the savings that was meant to buy the birthday bicycle gift for your daughter. you have to figure it out, and part of the problem or dilemma you got yourself into is to run out of funds in the other categories. You can decide which ever way that you like, yet part of the reason that we discuss some of these matters is so that guys can hopefully figure out ways to better establish systems and practices to help themselves and to lessen the chances that they are going to put themselves in a dilemma that they would not want to be in.. yet when they get to that spot, they are the ONLY one who can decide from which funds are they going to spend first.. .
You make a great point, a lot of investors feel it's just about labelling funds, forgetting that it's also more about prioritizing and managing them effectively. If a guy is able to build up quite a sizable portfolio but hasn't funded their emergency fund adequately, they might definitely find themselves in a very touch spot whenever an actual emergency arises. Having a completely separate savings for specific purposes like a birthday gift can potentially complicate things further if those funds can not be easily repurposed for emergencies.
When something comes up, like an emergency or just something that requires financial attention, it's completely left for the individual in question to decide which fund he'll tap in first to attend to that issue. And this decision depends on the individual's priorities and unique circumstances. It's really crucial to have the discussions around these matters because it really helps folks to think through and examine their financial strategies in order to help them establish better systems that potentially minimizes the risks landing themselves into a complicated and difficult situation.
Another important thing that is worth considering is the fact that having a clear hierarchy of funds can really help. For example, avoid using the emergency fund on things that are not actually emergencies and also trying as much as possible to preserve other savings or backup funds for their actual and intended purposes. It's also very crucial for every investor to regularly review, evaluate and make necessary adjustments to their financial plans in order to make sure that their plans aligns perfectly well with changing needs and priorities.