23 Nov Saving For The Unexpected
Many of us know we have to save for the long-term: college, retirement, etc. But not many of us think about the shorter term: emergencies that crop up like vehicle repairs and hospital bills. Those are the types of things that stop you dead in your tracks because you may not have enough liquid assets to cover those emergencies – and you don’t want to have to resort to using the credit cards. Going into debt over emergencies is not a good way to get through life.
Developing a Budget
Sometimes an unexpected life event happens, whether divorce, job loss or illness. You need a budget in place in order to plan for those contingencies. Take stock of your financial situation and come up with a plan that reflects your unique situation. Building your emergency fund will take time, and you don’t want to be sidelined by a financial crisis.
First, write down your current expenses, referring to recent credit card bills and bank statements. Second, estimate your monthly income. Third, compare your income to your expenses. If the expenses list is higher, you will have to scale back on your spending to balance out the two.
Know How Much to Save
Experts agree you should have between six months and a year of funding to cover expenses during that time period. How much you save will depend on how much you owe for the following:
- Housing expenses
- Health care
- Debt repayment
- Personal expenses (household supplies, haircuts, clothes and toiletries)
Set Up Your Savings Account
Now it’s time to sign up for a savings account that’s earmarked solely for an emergency fund. Once you have come up with a monthly savings goal based on your income and expenses, sign up for automatic deposit through your employer. This will ensure strong and steady growth of your emergency fund. Add a portion of any windfalls you come into, such as tax refunds and bonuses. Sock a good portion of the rest into investments.
Augment Your Savings
Once you get going with your emergency fund, you can branch out to other areas of your investment plan through conservative contributions in stocks and mutual funds. Being wary of any broker who makes deals seem too good to be true, always know the number of a good stock fraud attorney! Thomas Law Group has a success rate of more than 90 percent, helping investors recover losses since 1991.