Do you have a financial safety net? It’s worth thinking about and setting it up. What will happen to you and your dependents if you lose your job for a few months? What if you suffer an accident that prevents you from earning a living? Or what if unexpected expenses come up? Have you made provisions to make sure the bills are paid and your family is taken care of?
If not, now is the time to start. But where do you actually start? Having three to six months of living expenses in an interest-bearing account is a good place to start. Think about what your family will need to live comfortably if all income is eliminated. Then start saving as much money as you can until you build that safety net.
Put the money you normally spend on eating out, going to the movies, buying the latest TV and tech gadgets, etc., into your savings account until you have saved enough to have a comfortable cushion. To make this step go even faster, you should also add bonuses, tax refunds, etc.
Don’t just stop there. Make it a goal to add to your safety cushion as often as possible and revise your numbers from time to time. Your cost of living may go up or down over time, and you can adjust the amount of readily available money you need to set aside accordingly.
Life and disability insurance are another important part of your financial safety net, as is your retirement plan. Do you have a plan for how you will support yourself (or your family) if you can no longer work? Call your insurance agent to discuss your current coverage. Make sure the insurance you are paying for is paying out what you need, and if not, make adjustments.
Once you have a firm handle on these two parts of your safety net, invest additional savings in higher-interest accounts. While you won’t be able to access the money invested here right away, it will come in handy when you’re faced with a long-term financial emergency or are ready to retire. On the bright side, there are many investment options that will give you a much better return than your simple savings account at the bank. Talk to your financial advisor and set up a plan that works for you, your family, and your future.
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