The Unexpected

At the beginning of the year, my wife Kaycee and I decided we were ready to give in to our parents’ pleas and start a family. Like a lot of young couples, we were very excited and anxious and a host of other emotions about the idea of starting a family. A little while after finding out Kaycee was pregnant, we scheduled our first doctor appointment to have an initial ultrasound.

Being first-time parents, we were overly nervous for the appointment. What if there was a complication with the pregnancy or something wrong with the baby? Or maybe the pregnancy tests were a fluke and she wasn’t actually pregnant. We just didn’t know what to expect and were mentally prepared for anything.

As it turns out, everything came back healthy and she was indeed pregnant. However, when the doctor projected the ultrasound onto the TV in the small hospital room, he said something we never expected:

“Do you guys see that? So uh… you have two babies in there.”

Huh? Two babies?? TWINS!?

That… wasn’t on our list of things that we had thought about and prepared for. It was a moment of pure surprise.

After our initial shock wore off, the doctor walked us through what to expect with the pregnancy and gave us some advice. At the end of the lecture his final remark was:

“Oh and start saving your money!”

Of course, as a financial advisor, my thoughts started drifting to the financial implications of twins—two car seats, two cribs, twice as many clothes, twice as much food, double the diapers, double the health insurance premiums, etc. Suddenly, two kids began to seem slightly more daunting than just one.

Then, I thought some more about the advice from our doctor to start saving our money. It occurred to me that if we had just started to save when he told us to, without any money saved up beforehand, I’m not sure we would be able to make it work financially—and at a minimum would be a lot more stressed than we are.

Fortunately, Kaycee and I didn’t start saving just a few months ago. We’ve maintained a high savings rate throughout our marriage and, in addition to investing, have been continuously saving up cash for unexpected life events such as this.

According to our doctor and a quick Google search, there’s about a 0.4% chance that a natural, spontaneous pregnancy will result in twins. The odds of us having twins were pretty low. So low, one could argue, that it wouldn’t really be worth preparing for. Nevertheless, it happened!

John Littlewood was a mathematician who sought to debunk the idea of miracles being anything more than simple statistics. He theorized:

“In the course of any normal person’s life, miracles happen at the rate of roughly one per month.

The proof of the law is simple. During the time that we are awake and actively engaged in living our lives, roughly for eight hours each day, we see and hear things happening at a rate of one per second. So the total number of events that happen to us is about 30,000 per day, or about a million per month.

The chance of a miracle is about one per million events. Therefore we should expect about one miracle to happen, on average, every month.”

The idea that incredible things happen due to boring statistics is important because it’s true for terrible things too.

Morgan Housel talks about how a 100-year event doesn’t mean it happens every 100 years, it means there’s about a 1% chance of it occurring in any given year. If next year there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something unexpected will happen next year – or any year – are uncomfortably high.

“Things that have never happened before happen all the time.” — Scott Sagan

Given that unexpected things happen all the time, it makes sense to give yourself a margin of safety with your personal finances. You should build a financial plan that can survive a wide range of outcomes.

Some will save for a downpayment on a house, or a new car, or for retirement. Which is great. But saving doesn’t require a goal of purchasing something specific. You can, and should, just save for saving’s sake. Having an adequate emergency fund in place turns financial “emergencies” into mere inconveniences.

Predicting what you’ll use your savings for assumes you live in a world where you know exactly what your future expenses will be, which no one does. Saving is a hedge against life’s uncanny ability to surprise at any moment.

Thanks for reading!