What is a Financial Cushion and Why Do You Need One for Peace of Mind in Entertainment?
Next to life itself, the most important thing is financial security. It can be the difference between life and death when the going gets tough.
When P.T. Barnum said “Money is a terrible master but an excellent servant,” he meant that it’s better to be in control of one’s finances than to be controlled by them.
It’s true that we all pray and wish that our paths will be smooth in life. However, the reality is that unexpected events happen, some of which make it impossible for us to make as much money as we are used to. In fact, some life events can set us so backward that rising easily may be next to impossible. In such scenarios, financial cushions can come into play if available.
What is a Financial Cushion?
A financial cushion is a backup plan for rainy days. It is the money you have been consciously saving for unexpected and often unfavorable life events like a sudden illness, job loss, or a drastic policy change affecting your business. With it, you can keep funding your critical life and business functions for up to several months before you find your feet again.
The idea behind having a financial cushion is that life is a mix of good and bad. One cannot reasonably expect that everything will be rosy without some challenges. But with adequate savings set aside for these unplanned and perhaps undesired happenings, one can have some respite when they happen.
Financial Cushion and the Entertainment Industry
Unlike traditional 9-5 workers, who are guaranteed their weekly or monthly payment so long as they remain employed, people in the entertainment industry experience seasonal fluctuations. For those in the gaming and electronic sports niche, periods outside summer and winter holidays are usually dry with low incomes. Yet, at this time, they must continue to fund certain business essentials and keep their operations intact.
Many casinos now support transactions via e-wallets like Skrill, making payments and withdrawals seamless for players. A Skrill Casino makes international transactions fast and easy for casino vendors and players. The good thing is that most Skrill online casinos often have robust financial cushions with this e-wallet, guaranteeing a buffer in case of emergencies.
Why is a Financial Cushion Important?
A financial cushion meaning is incomplete without listing the reasons for it. If you need convincing reasons you should buy into this practice, here are they.
- Peace of Mind
It’s just satisfying to know that if anything ever goes wrong with your plans, you have something as a backup. Whether as a player or a casino owner, knowing that you can “afford to falter a bit” gives you some comfort that every casino stakeholder needs.
- Stiff Competition
Even if you aren’t into casinos or e-gaming, almost every entertainment sector is highly competitive. Many companies and individuals are working really hard to outdo one another in winning players’ confidence meaning that you might occasionally witness rejections and low patronage because of this. At such times when patronage is low and money isn’t flowing in as expected, you can keep the business afloat with your financial cushion
- Unplanned but Necessary Spendings
Yes, companies and individuals try to draw up budgets at the beginning of each financial year. Nevertheless, it’s a common occurrence for unplanned but important expenses to come up. These can include equipment upgrades, special training, or fines for non-compliance. Some businesses without a financial cushion have folded up because of these unplanned expenses.
- Upscaling or Transitions
Sometimes a person in the entertainment niche may want to try out other genres. Of course, the initial stage is usually challenging, requiring a fallback plan and funds, which a financial cushion can supply. Similarly, if a casino wants to expand by having multiple locations or an online presence, the finances needed to achieve such can be demanding and affect the business if a cushion is not in place.
How to Set Up A Financial Cushion
It’s good to ask, “Why is a financial cushion important?” but much more important to know the how. If you are planning to build a formidable financial cushion, here is how to go about it.
Investment
From the financial cushion meaning given above, it is evident that the more money you have to save, the better. Investing is one of the best ways to multiply your disposable income and have sufficient cushion for your future needs.
Budgeting
Without an intentional act of budgeting for financial cushions, it may be difficult to have any leftovers for it. Make conscious plans to include cushions in your yearly or quarterly budgets even if you don’t envisage any future costs.
Intentional Savings
“Do not save what is left after spending, but spend what is left after saving,” says Warren Buffett.
This cannot be truer for financial cushions because it will never be possible if treated as an afterthought.
Conclusion
Nothing guarantees peace of mind in any line of business as a financial cushion.
However, according to Walt Disney, when planning any financial goal, “the way to get started is to quit talking and begin doing.”
