There are always fluctuations that occur with your financial situation. Being prepared for the ups and downs that happen is one of the key components to smart financial planning. What type of savings account should you create? What savings account options are available? How much money should you set aside in savings? With the future always being an “unknown” it is best to create an emergency fund that you can live on for at least 3-6 months. Here are some tips to follow as you create an emergency fund:
- List all of your expenses
- List the income amount you need to live comfortably
- List your debt to income ratio
Where Do You Sit?
Taking stock of your financial situation can assist you in proper planning. You need to know just how much money you have coming in and going out and if you have plenty of money set aside to pay for everything if you lose your job. Many people find that when they lose their job, they also end up losing their cars and other assets as they did not have enough money in their emergency cash fund to pay for these “necessary” luxuries. No matter which stage of life you are in, it is always advisable to have at least 3-6 months worth of income money saved.
Opening A Savings Account
So where should you invest the money for your emergency cash fund? Many people assume that using the same bank they already do business with will be just fine. While it is easy, it’s not the best way to build the money in a timely manner. Money market accounts and online savings accounts can provide you with an interest rate that is 6 times higher! Compare rates to find out which online savings accounts have the best rates right now.
Focus On Getting A Job
If you lose a job, your primary focus needs to be on finding a new one. Having a steady source of income is vital to just about every aspect of your financial life. Even if you find a job that you aren’t 100% happy with, accept the offer and then continue looking for a new job. Having money coming in instead of taking from your emergency cash fund or worse, your retirement, is the best option you have to be financially prepared for any situation.
Remodel Your Expenses
If you do unfortunately lose your job or your income level drops, you need to remodel the way you spend money. Prioritize your spending as it can really save you hundreds of dollars a month. Consolidate your debt into a single loan. Sell your car or other things that you do not need. Cut the cable and expensive entertainment luxuries. Look for ways to save money instead of spending it!