Do you have a financial safety net? It’s something worth thinking about and setting up. What will happen to you and your loved ones if you lose your job for a few months? What if you get into an accident that may prevent you from earning a living? Or what if some unexpected expenses come up. Do you have anything in place to make sure the bills continue to get paid and your family is taken care of?
This is something I am actively working on and I can’t tell you that living through a pandemic and looking at losing time from work due to having to isolate, can be quite stressful. And if you are finding it difficult, please don’t be so hard on yourself. It took me a long time to get on top of my finances.
If not, now is the time to get started. But where do you actually start? Having three to six months’ worth of living expenses tucked away in an interest-bearing account is a good beginning. Figure out what your family needs to comfortably live on if all income stops. Then start saving as much money as you can until you have built up this safety net.
Put the money you usually spend on going out to eat, going to the movies, buying the newest TV and Tech gadget, and the likes into your savings account until you’ve saved enough to have a comfortable cushion. Take make this step go even faster, add any bonuses, tax refunds, etc. as well.
Don’t just stop there. Make it a goal to add to your safety cushion as you can and come back and revise your numbers from time to time. Your living expenses may go up or down over time and you can adjust how much you need to set aside in quickly accessible money accordingly.
Life and disability insurance are another important part of your financial safety net, as is your retirement money. Do you have a plan in place to continue to cover your living expenses (or those of your family) when you can no longer work? Call up your insurance agent and go over your current coverage. Make sure the insurance you’re paying for will pay out what you need and if not, make adjustments.
Once you have those two parts of your safety net firmly in place, consider investing any additional savings into a higher interest-bearing account. While you may not be able to access any money invested here right away, it will come in handy when you’re dealing with a long term financial emergency or are ready to retire. The plus side is that there are plenty of investment vehicles out there that will get you a much better return than your plain savings account at the bank. Talk to your financial adviser and come up with a plan that’s right for you, your family, and whatever the future may hold.