Building a Financial Safety Net

A financial safety net is any amount of money you have to live on when you need it, such as being out of work, taking on extra medical bills from visits to the doctor, or retirement. You can build a safety net by putting money in savings or investment accounts and insuring yourself and what you own. Although it's hard to save when you have so many regular expenses, you'd be surprised at what you can sacrifice in order to put some money away. With discipline and patience you can you work toward your goal, little by little.

In general, a good goal is to aim to build a savings that will equal three to six months of your living expenses. To get there, you will need to analyze your spending and saving habits, look for opportunities to cut corners and make progress, and make sure you have the insurance protection you need along the way. Try these tips.

Spending and Saving Habits

* Track your daily, weekly, monthly, and yearly spending
* Notice where you can cut back; remember that the little things add up
* Create a budget after assessing your true needs
* Budget monthly savings and deposit money on a regular basis to make it happen
* Consider consolidating loans, if you have any, to save interest costs
* Analyze the long term costs of any loan rather than focusing on the monthly payment amount only
* Make it part of your monthly budget to pay back your debts
* Pay off credit cards monthly and use for emergencies only
* Be cost-conscious and creative about what you need to buy

Opportunities to Make Progress

* Buying your own home provides tax benefits over renting and, if you pay off your mortgage before you retire, you will have greatly reduced your housing costs
* See if your can start a 401(k) retirement plan at work; sometimes your employer will match each dollar you put in your account
* Contributing to IRAs, if you qualify, reduces your tax burden
* Some companies offer their employees flexible savings plans for medical costs and dependent day care expenses

Insurance Protections and Legal Will

Health insurance: Protects you from emergencies such as unexpected doctor or hospital visits.

Long-Term Disability: Protects your income when you are unable to work due to illness or injury.

Life: Protects your dependents should you die. The type of insurance and amount you need varies depending on your age as well as the age and needs of your dependents.

Auto: If you drive, this is required. You can reduce costs by increasing your deductibles or purchasing liability insurance only, but have enough money saved to pay the deductible or even purchase a replacement vehicle in case of an auto accident.

Homeowners Insurance: This is required by lenders. Protects your possessions and covers your home when a disaster strikes.

Renters Insurance: Protects your possessions.

Legal Will: Determines who will be guardian over your children if you die. It makes certain your possessions go where you wish.

On Your Way To Greater Peace of Mind
Once your financial safety net is in place, you can move on to spend your money however you please.

-- Trina Lambert

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