The IRS website states that the agency can include the last three years in an audit process, and no more than 6/7 years unless there were previous irregularities. Overall, they do not recommend keeping tax forms longer than 7 years, with some experts citing 10 years as a max. Judging from all those numbers, it seems that the IRS uses a safety factor of 2, or two times the normal audit time. I’ve noticed recently that outside of engineering, many places have started to give mins and max that follow the intent of this formulaic protection.
Many scientists stated that 6 ft was enough for social distancing, but some medical groups, like CEBM at Oxford, did imply that the magic number was actually 12ft or 4 meters depending on the environment. I found this fascinating because most businesses wouldn’t be able to pull off greater social distancing spacing for check out lines or pick up. At some point, the scientifically based safety factors had to be averaged, or reconsidered, to mitigate risk without being overprotective. The intent is to do no more harm than necessary, to not hinder the capabilities of the economic system beyond repair, to be cautious enough.
When we are overly conservative we undermine the design or rule we desire to serve. For example, there’s benefit in saving for retirement but not at the cost of your present lifestyle and quality of life. My mother had thousands in the bank before getting sick, which we’d rather she had spent traveling the world with us than dutifully watching over grandma 24/7 which she didn’t need to do. We impose goals and ideas on ourselves that skew the effect of the safety factors, of the money we actually should save vs. the way we should be spending it. Works the same in the other direction. Having a poor safety factor will result in a shortfall, producing a burden that could have been avoided with the proper guidance.
Below are a few of the safety factors for success I’ve found throughout the years.
- Save at least six months of expenses or up to one year of household income combined in a mix of investment and savings accounts. Have two months expenses saved in a readily accessible liquid account.
- Pay all monthly bills one month in advance. If anything happens, like a layoff or accident, your family would be covered for a few weeks, freeing them from the burden of worrying about cash while they work through adversity.
- Life insurance policy should cover 5 years of lost income. If you earn $20k, you need at least $100k in guranteed funds. If your employer pays for a policy, get outside coverage as well. Make sure prime payments are included in your savings plan.
- Prepay for funeral services or get an insurance policy that allows for an allowance in case of your passing.
- Save 10% of the cost of housing (mortgage or rent) for future repairs or to move. This could be a part of the unemployment savings as well. If so, replenish money used as quickly as possible if the amount exceeds 25% of savings. You don’t want to get caught with your pants down.
- Saving 16% or up to 19000 a year for retirement through a qualifying pre tax account (check IRS website for latest deduction amount).
- Live off 25% of your net income. Invest and save the rest.
- Add up all the cost of Christmas gifts, graduation gifts, etc. Save 10% to 20% extra if the items you are purchasing require peripherals or accessories such as controllers, games, or software overtime.
- Mail items 3 to 6 days (or 1.5 times) prior to the postal service advertised delivery estimates, in case of delays.
- Have at least 2 copies of important documents, like birth certificates. Print outs of passport, credit cards, and license information in case of theft or loss.
- For pets, have at least one month food and treat supply that doesn’t require refrigeration and lasts a long time in case of emergency. Don’t buy more than two weeks to a month ahead if you do so to avoid spoilage. Rotate the emergency stash in when it is getting close to the expiration date.
- Don’t buy more than one extra shampoo bottle or backstock if the item takes weeks or months to be depleted. If you can get it at the store at an hour’s notice, you don’t need to have more than 1 in reserves. A sale isn’t value added if you tie up your money in unused stock. Unless you are selling your extras at a higher cost or running a business, one of each will suffice.
- Instead of having multiple tools for unique jobs (like a blender and a food processor) invest in multipurpose tools. Less clutter and less spare parts to maintain!
- For a family of X, you need 2x the dishes, cutlery and silverware plus an additional 2 sets for guests. That’s two meals worth of stuff for a household.
- Experts recommend storing 6 months of goods per family member. Work things into the daily routine before expiration dates approach to avoid spoilage. Check stock monthly and replenish 1:1 accordingly.
- Have one meal/snack, water ration, ponchos, and blankets for each passenger in a vehicle. This protects you during long waits, cold environments. A fully charged back up battery to charge cellphones is also recommended.
It is hard to convince others to follow safety guidelines and I hope that by talking about safety factors they can start to understand what boundaries to push and which ones to respect. Relationships work this way too. There’s harm in being too patient, too kind, too forgiving and too dutiful. Take time to determine what you are willing to endure and what you MUST endure. Life is full of safety factors, of rules that will guide us to old age and keep us protected from most certain uncertainties (like illness or job loss, and in some cases grief). Start looking for your personal numbers; for how much life insurance you should have or the best mortgage for your retirement goals. How much you really need to save for college. How much you will need to love your best life.
If you have others, please share in the comments section.
Stay safe! ⛑😷