How To Safeguard Your Financial Life

How to Safeguard Your Financial Life Several financial planners would agree that one of the foremost and important steps that you should take to protect your financial stability is to set aside funds as emergency reserve. The concept that you have the


fund for emergency and unexpected events is enough to


help you stay away from using your credit card and


drown yourself in debt.




How to Get Started




Everyone must stash a little extra cash in case of


emergencies. However, how much money should you keep?


Although the topic of exactly how much money is needed


for your emergency fund is open to debate, the minimum


amount should be enough to cover your expenses for


daily living for at least three months. It is also


wiser to save for six months though most financial


planners agree on a full year worth of cash.




Your personal circumstances and what it takes to


provide you with a peace of mind are the elements to


help you determine just how cautious you want to be.


If for instance, you have well-off parents who have


always been supportive and willing to help you in a


financial crisis, an emergency fund for three months


will be sufficient. On the other hand, if you had


reach for you credit card for help and end up paying


15% in interest on the debt, you would be better off


saving enough money for your expenses that would last


for at least six months.




If by any chance you are thinking about where to place


your money, emergency fund, paying off the credit card


debt or funding your 401(k), you can always start with


your credit card debt. Next, you can contribute to


your 401(k). This step is especially useful since you


can later borrow money from your 401(k). However, as


soon as all those are finished, return to your project


of setting up your emergency fund.




If you do not feel like you are required to make your


entire funds this week, you can start like everyone


else. Begin by setting aside a monthly amount, like


for instance, 5% of your paycheck or other amount that


allows you to build one month’s worth of living


expenses over the course of a full year. It is also


advisable and helpful to make this automatic. You can


do this by asking your bank to do an automatic program


for deduction from your checking account to your


savings account.




Additionally, monitor you spending habit each month


and always search for areas that you can develop. If


by any chance you receive a promotion, bonuses, or


other unexpected windfalls, always think about


including them to your emergency fund.




Where to Keep the Cash




Keep your emergency fund somewhere that is both easily


accessible and safe because you might be required to


get the cash in a hurry during emergencies. Remember


not to put your cash in the freezer but do not tie


them up together in stocks whose worth may have


declined by the time you need them.




The best option you have is to open a savings account


or money market account. However, always examine their


offer with regards to the minimum balance, interest


rate and other terms.




By time you think you have saved enough, learn how to


stop. You can now sleep easier and try to start


placing your additional saving into higher-interest


and usually less accessible investments or accounts.