I don’t feel safe financially. What should I do? In anyone’s life, expected and unforeseen situations arise that require moral and financial resources. They can be positive or negative, and tasks exist to solve them.
Is it necessary to prepare for them? And if so, how? The answer is simple — of course, you do! The main thing you can do is take care of your financial security. Have a sense of security financially? Of course, but can you find quite the formula for security and comfortable financially?
Financial security is an order in which the conditions for protecting a person’s vital interests, the possibility of social development, and a protection system are guaranteed. It is a living environment where people are prepared for and able to cope with potential financial challenges. So how to stay financially safe?
According to the Federal Reserve survey, more than half of Americans experiencing disruption and not working, for the past 2 years.
There are two categories of financial challenges:
- Those that a person can handle on their own with a financial safety cushion or with sound financial planning.
- Fatal events are the financial loss the family will not repair themselves. You can protect yourself from these events through insurance.
Thus, the financial security of a family or individual is provided by three components:
- a financial cushion;
- life and health insurance;
- an effective investment plan to build capital.
Does carefully mean to make safe financially? Definitely yes. Being cautious will give you a sense of security financially.
Why Do You Need a Financial Safety Cushion, And How Big Should it Be?
What will allow you to sleep when things are unstable: someone’s salary gets cut, someone’s job gets laid off. And this is only one side of the coin. On the other side can be a sudden illness, a tree that fell on the car, or a broken refrigerator, without which there is no way to do without. And for all these cases, money is needed!
And what can be done to sleep well? The only true answer is to build a financial cushion. And the sooner, the better. How much capital do I need to be financially safe? A financial cushion is a pre-accumulated amount of money that will seriously help you if you lose your primary source of income or have some crisis. Simply put, it is a rainy day fund.
In what specific cases can a financial cushion save you?
- if you lose your income;
- if you have health problems;
- when a major accident occurs.
How Big Should Your Airbag Be?
The minimum amount needed is easy to calculate: your average expense per month multiplied by the maximum number of months you may need to look for work. But in any case, we advise having a reserve that you have enough for at least six months. If there are problems with money, use cash advance app.
For a family with children, of course, the size of the financial cushion increases because, with the arrival of children, the contingencies become even more significant — young children are often sick and increase, which means ongoing costs for clothing and education of the child.
The size of the financial cushion is taken care of. What’s next? Next, it makes sense for you to choose to invest wisely!
All funds that you are considering as a financial cushion, we recommend placing in liquid financial instruments, that is, those that, in addition to income, make it possible, if necessary, to quickly return at least what you invested.
These may be deposits, bonds, and products formed on their bases, such as investment funds investing in reliable bonds and money market instruments. Then you will understand for yourself when it is financially safe to move.
Life And Health Insurance
Why are life and health insurance closely linked to the individual’s financial stability and the family in general? Accumulative life insurance is a combined financial product that combines insurance and investment, i.e., it provides both protection for a person’s life and an opportunity to accumulate money.
The basic idea is that a person makes periodic contributions to the insurance company during the time specified in the contract. Then, in case the person lives to the end of the contract or dies during the contract term, the insurance company makes the payments defined in the contract to the insured person or the beneficiaries specified by him in the contract.
Sounds good, given that the program combines several functions at once, but let’s understand the merits — what are the main pros and cons of insurance?
- Convenience — with one contract, you simultaneously protect yourself and your loved ones and build capital.
- Financial protection in case of unforeseen circumstances.
- The possibility of securing accumulated funds against inflation.
- Insurance benefits are tax-deductible.
- Funds transferred under the contract are not divided in a divorce and are not included in an inheritance.
- Comparatively low return on investment.
- Early withdrawal from the contract in most cases involves penalties.
- Risk of loss of premiums paid if there are no funds to pay.
- Contributions are not yet insured by the state, as, for example, bank deposits (but they already developed a program).
Cumulative life insurance is directly linked to the financial stability of the person. Funds you invest in mean an increase in savings. Yes, there is no high income, which can be in other investment instruments. But the client is insured and guaranteed to receive savings at the end of the insurance term.
Investment Plan: What Is It, and How to Prepare It?
It seems that many people today have heard that everyone should have a personal investment plan. Both the experienced investor and the average person. But what is it, and what is it for? Let’s find out.
An investment plan is like a compass. It will be easier for you to orient your money possibilities and save. It will help calculate your forces correctly and check your guidelines from time to time.
An investment plan is a detailed strategy for achieving your goals and expected investment results. The point is to spell out where, when and how much money you want to spend. And then, based on this, plan your investments and choose a suitable investment tool. To make it easier to understand, imagine the situation.
Let’s say you are facing a significant expenditure of money — purchasing a car. The first thing you must do is determine the value of the desired car and how much time remains until the planned expenditure. Based on this, you choose the amount and frequency of the deductions. And then select the tool you plan to raise the necessary amount.