Money Matters

Establishing a Financial Safety Net

In times of crisis, you do not want be shaking pennies out of a piggy bank. It is important to always plan for the future and expect the unexpected. Having a well-established financial safety net will help you feel more secure when a financial emergency occurs.

How Much is Enough?
Most financial professionals suggest that you have at least three to six months worth of expenses in a savings or money market account. However, the actual amount varies from person to person and really depends on your specific situation. Do you have a mortgage or pay rent? Do you have short-term and/or long-term disability protection? Do you have car payments? Other factors to consider include your job security, health, and income. The bottom line is, without a financial safety net, a time of crisis could be financially devastating.

Building Your Safety Net
If you have not established a cash reserve, or if the one you have is insufficient, there are a few steps you can take:

Begin putting aside a little bit of money after each paycheck, starting right now. Even if it is just a little bit, it will get you in the habit of saving regularly. Most employers now offer an automatic direct deposit into your bank account. Go ahead and have a percentage automatically go into your savings account before you have a chance to spend it.
Even if you have debt in other areas, if you have extra cash at the end of the month, consider it savings and put it in the piggy bank.
Avoid unnecessary expenses. If you think you need something, give it a week or even a month before you make the purchase. You may find you did not need it after all.
Look for ways to reduce, streamline, and eliminate. Consider potluck dinners with friends instead of eating out. Throw a Clothing Exchange Party instead of purchasing new clothes.
Examine the money you owe. Figure out what debts have the highest interest rates and aim to remove or refinance the most expensive.

A final note: Your credit line can be a secondary source of funds. However, borrowed money always has to be paid back and usually at high interest rates. Therefore, you should not consider lenders as a primary source for your safety net.

Check Your Financial Strength
Personal and financial circumstances often change; a new baby comes along, an aging parent needs care, or a larger home brings increased expenses. Since your financial safety net is your main protection against financial devastation, you should review it annually to make sure it fits your current needs.

Already in Crisis
If you are already in a mode of financial crisis, without a net, there are actions you can take before your situation gets worse:

Assess your financial strengths. Find out how much money you have in your checking and savings accounts, your retirement plan, and any other sources of income
Estimate the value of your house, cars, and any other major property.
Find out your total debts from mortgages, credit cards, and loans.
Contact all your creditors and let them know your situation. Attempt to negotiate lower monthly payments until your circumstances change. Sending regular token payment amounts may help as well.
If you are in a profession where you can consult or freelance, do it. Consider taking on odd jobs like landscaping, babysitting, waiting tables, or bartending.
Change your buying and shopping habits immediately. Cancel unnecessary memberships to fitness centers, DVD rental clubs, and other monthly recurring-costs. However, check to make sure that you do not incur more charges if you break a contract early.
Stop eating out; this can save you up to 50-70% in food costs. Overhaul your grocery shopping habits. If you shop at upscale markets, switch to a discount supermarket. Switching to store or off-brands can save an additional 10-20%.
Never shop unless you need to. You can probably postpone buying clothes and other luxury items for several months.
Last, but definitely not least, be honest with your family and those close to you. Like any other stressful situation, having your loved ones support will help alleviate the pressure a financial crisis can bring.



	Sales Tax - Rental Property Life Insurance Good Debt vs. Bad Debt Difference Between a Will and Living Trust Tax Freedom Day Small Business/ Self-Employed Individuals Retirement Options Establishing a Financial Safety Net Financial Tips 2010 Tax Relief Act for Individuals Tips for Starting Your Own Business Tips for Small Business / Self-Employed Individuals Archived Video Tips	Establishing a Financial Safety Net In times of crisis, you do not want be shaking pennies out of a piggy bank. It is important to always plan for the future and expect the unexpected. Having a well-established financial safety net will help you feel more secure when a financial emergency occurs. How Much is Enough? Most financial professionals suggest that you have at least three to six months worth of expenses in a savings or money market account. However, the actual amount varies from person to person and really depends on your specific situation. Do you have a mortgage or pay rent? Do you have short-term and/or long-term disability protection? Do you have car payments? Other factors to consider include your job security, health, and income. The bottom line is, without a financial safety net, a time of crisis could be financially devastating. Building Your Safety Net If you have not established a cash reserve, or if the one you have is insufficient, there are a few steps you can take: Begin putting aside a little bit of money after each paycheck, starting right now. Even if it is just a little bit, it will get you in the habit of saving regularly. Most employers now offer an automatic direct deposit into your bank account. Go ahead and have a percentage automatically go into your savings account before you have a chance to spend it. Even if you have debt in other areas, if you have extra cash at the end of the month, consider it savings and put it in the piggy bank. Avoid unnecessary expenses. If you think you need something, give it a week or even a month before you make the purchase. You may find you did not need it after all. Look for ways to reduce, streamline, and eliminate. Consider potluck dinners with friends instead of eating out. Throw a Clothing Exchange Party instead of purchasing new clothes. Examine the money you owe. Figure out what debts have the highest interest rates and aim to remove or refinance the most expensive. A final note: Your credit line can be a secondary source of funds. However, borrowed money always has to be paid back and usually at high interest rates. Therefore, you should not consider lenders as a primary source for your safety net. Check Your Financial Strength Personal and financial circumstances often change; a new baby comes along, an aging parent needs care, or a larger home brings increased expenses. Since your financial safety net is your main protection against financial devastation, you should review it annually to make sure it fits your current needs. Already in Crisis If you are already in a mode of financial crisis, without a net, there are actions you can take before your situation gets worse: Assess your financial strengths. Find out how much money you have in your checking and savings accounts, your retirement plan, and any other sources of income Estimate the value of your house, cars, and any other major property. Find out your total debts from mortgages, credit cards, and loans. Contact all your creditors and let them know your situation. Attempt to negotiate lower monthly payments until your circumstances change. Sending regular token payment amounts may help as well. If you are in a profession where you can consult or freelance, do it. Consider taking on odd jobs like landscaping, babysitting, waiting tables, or bartending. Change your buying and shopping habits immediately. Cancel unnecessary memberships to fitness centers, DVD rental clubs, and other monthly recurring-costs. However, check to make sure that you do not incur more charges if you break a contract early. Stop eating out; this can save you up to 50-70% in food costs. Overhaul your grocery shopping habits. If you shop at upscale markets, switch to a discount supermarket. Switching to store or off-brands can save an additional 10-20%. Never shop unless you need to. You can probably postpone buying clothes and other luxury items for several months. Last, but definitely not least, be honest with your family and those close to you. Like any other stressful situation, having your loved ones support will help alleviate the pressure a financial crisis can bring.