How to Build a Financial Safety Net

Do you have a financial safety net? It’s something worth thinking about and setting up. What will happen to you and your family if you lose your job for a few months? What if you get into an accident that may prevent you from earning a living? Or what if some unexpected expenses come up? Do you have anything in place to make sure the bills continue to get paid and your family is taken care of?

Having financial freedom means having the money available to take care of your family if anything were to go wrong. Use these financial tips to start planning a safety net for your household.

If you don’t have any of this in place, now is the time to get started. But where do you actually start?

Build a big savings account

Having three to six months’ worth of living expenses tucked away in an interest-bearing account is a good beginning. Figure out what your family needs to comfortably live on if all income stops. Then start saving as much money as you can until you have built up this safety net.

Put the money you usually spend on going out to eat, going to the movies, buying the newest TV and Tech gadget and the likes into your savings account until you’ve saved enough to have a comfortable cushion. Take make this step go even faster, add any bonuses, tax refunds as well.

Make sure you have insurance

Life, healthy and disability insurance are another important part of your financial safety net, as is your retirement money. Do you have a plan in place to continue to cover your living expenses (or those of your family) when you or your husband can no longer work? Unexpected doctor or hospital bills can put a strain on your finances without health insurance to cover them. Call up your insurance agent and go over your current coverage. Make sure the insurance you’re paying for will pay out what you need and if not, make adjustments.

Invest for the future

Once you have those three parts of your safety net firmly in place, consider putting any additional savings into investment accounts, like mutual funds. While you may not be able to access any money invested here right away, it will come in handy when you’re dealing with a long-term financial emergency or are ready to retire.

The plus side is that there are plenty of investment vehicles out there that will get you a much better return than your plain savings account at the bank. Talk to your financial adviser and come up with a plan that’s right for you, your family and whatever the future may hold.

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