10 Ways To Prepare For A Personal Financial Crisis
I’m always happy to pass on great info...and this is great info! I’ve included a few snippets below lifted from the full article.
1. Maximize Your Liquid Savings
Cash accounts like checking, savings and money market accounts, as well as certificates of deposit (CD) and short-term government investments, will help you the most in a crisis. You'll want to turn to these resources first, because their value doesn't fluctuate with market conditions (unlike stocks, index funds, exchange traded funds (ETFs) and other financial instruments you might have invested in). This means you can take your money out at any time without incurring a financial loss. Also, unlike retirement accounts, you won't face early withdrawal penalties or incur tax penalties when you withdraw your money - one exception is CDs, which usually require you to forfeit some of the interest you've earned if you close them early.
Don't invest in stocks or other higher-risk investments until you have several months' worth of cash in liquid accounts. How many months' worth of cash do you need? It depends on your financial obligations and your risk tolerance. If you have a major obligation, like a mortgage or a child's ongoing tuition payments, you might want to have more months' worth of expenses saved up than if you're single and renting an apartment. A three-month expense cushion is considered a bare minimum, but some folks like to keep six months or even up to two years' worth of expenses in liquid savings to guard against a long bout of unemployment.
2. Make a Budget
If you don't know exactly how much money you have coming in and going out each month, you won't know how much money you need for your emergency fund. And if you aren't keeping a budget, you also have no idea whether you're currently living below your means or overextending yourself. A budget is not a parent - it can't and won't force you to change your behavior - but it is a useful tool that can help you decide if you're happy with where your money is going and with where you stand financially.
Do you need more detail on this subject? Head on over to the full article HERE for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts [email protected]; or call me on (0406) 534-233.
Thanks,
Chris