The recent government shutdown brought to light a very real issue that anyone could face at any time.
What would you do if you suddenly stopped getting a paycheck and you did not know when you would get another?
Fortunately for many Federal Employees, there were banks and other institutions who were willing to make exceptions, waive fees, and grant loans with little or no interest. Unfortunately, most of us would not receive the same favorable treatment and exceptions if we were to suddenly find ourselves without a paycheck for an indefinite period of time.
No matter how old you are, what your income level is, or whether you are working or retired, you should have an Emergency Fund in place to cover expenses in case your income suddenly ceased for an indefinite period of time. With an Emergency Fund you could pay your mortgage, car payment, electric bill, etc. and cover many of the necessities without acquiring unnecessary debt.
If you already have an Emergency Fund:
- Keep funding it until you have 3-6 months of expenses saved up.
- Verify that it is in an account that can be quickly and easily accessed without incurring fees or penalties. A savings account is a good place for an Emergency Fund.
- Do not use it for things that are not emergencies. A great deal on a dream vacation to Europe is not an emergency, a broken furnace is.
- If you need to use the funds for a true emergency, start saving on a regular basis again until you have replenished the funds.
If you have not started an Emergency Fund:
- Start one today.
- Set up automatic savings so you can save each month without having to think about it.
- Continue regular monthly deposits until the account is funded with at least 3 months (preferably 6) of your average monthly expenses.
- Do not withdraw from the account unless you are truly facing an emergency.
We all hope that we will never find ourselves without the security of a steady paycheck. However, an Emergency Fund offers some protection in case you ever do. If you would like to discuss options for planning for your future, call our office today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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