Liquid Savings
Many financial professionals encourage individuals to save six months to a year of expenses in the form of liquid, available cash. The purpose for this is to protect against financial hardship in case of an unexpected emergency such as major vehicle or home repairs, loss of income or injury or illness. These funds should be maintained within conservative savings vehicles such as savings and money market accounts.
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Retirement Savings
Retirement savings provide financial stability for individuals once they reach retirement age who can not, or do not desire to, work any longer. While the recommendations vary as to the amount of money one should have set aside for retirement, it is critical for those in their income earning years to contribute as much as possible to a retirement account, such as an IRA or 401(K), so long as there is adequate cash reserves available for emergencies. Retirement accounts can be maintained through employers, investment firms and brokerage institutions.
Insurance
Many people are either not insured or underinsured when in comes to health, home and life insurance coverage. The fact is, many uninsured and underinsured families have faced financial ruin as a result of inadequate health, home and life insurance. A person would be well advised to provide him or herself and family with adequate amounts of insurance coverage to prevent such hardship. Insurance agents through major corporations or local businesses can provide guidance and assistance to individuals regarding the appropriate types of insurance and coverage amounts.
Taking the steps to ensure that an appropriate amount of liquid savings are available for emergencies, retirement investments are well funded and adequate insurance coverage for home, health and life are in place, are crucial in planning for financial security. While personally focusing on the above topics is essential in the development of a comprehensive financial plan, consulting a legitimate financial professional is always recommended.
Having six months of expenses on hand is a good idea. In the past, people would advise that adults have at least three months of savings for expenses available. I suppose that as time has passed and the economy has changed, we have seen it take longer than a month or two for people to find new jobs. Six months to a year's worth of savings is definitely better.
ReplyDeleteGood points. I linked to this post from my blog.