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 what helps you be at peace.
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Is obvious that you can't work under a company forever the inevitable will happen one day when you least expect it and having something to fall back on is what would help you get back on your feet when you fall and prevent you from drowning yourself in debt.
Be that as it may everyone must stash a little extra cash in case of emergencies. A wise move I must say. 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 six months or a full year till you get back on your feet again.
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 to a year. This is because not everyone has a well to do parents so the second option I'm sure is what many would fall on.
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.
Here are some good reasons why you should start contributing to your 401(1) if you're working for a company.
Reference -http://www.401khelpcenter.com/401k_education/10_reasons_to_join_your_401k.html#.V7r0J9QrJkg
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 pay-check 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.
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 lol. On a more important note 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, then is up to you to decide if you want to stop or continue the choice is entirely yours whatever you think best for you and your family. The good thing is you can now sleep easier and try to start placing your additional saving into higher-interest and usually less accessible investments or accounts.
Another good option to safeguard your financial life and that of your family is by start your own business like many have. You can start small to begin with and build it up to the standard you want it to be. With the use of the internet and your computer you can start your own small home business and operate online during your leisure time.
I've come across many successful online business owners that started this way and build up their online business to 6, 7 and even 8 figures per year business. And the good thing is, you do not need lots of staff to work for you before you can achieve this goal. You can start with just you and your partner and employ more helping hands as you grow .
Here are a few successful online business owners that would inspire you. Pat Lynch the owner of “Smart Passive Income” http://www.smartpassiveincome.com
This guy makes 6 figure a month from his online business and 7 figures a year.
Another successful online business owner is Eben Pagan who makes over $20m a year from his online business with about 10 – 20 staffs working for him now. You can find out more about him here http://getaltitude.com
If they can do it so can you. All you need is learn a good business model that can turn even your passion to cash. The important thing is to have something that would safeguard your financial life for the future in the event of emergency.
Hope you find this post helpful. Feel free to comment.
Enjoy