Life has a way of throwing unexpected
financial roadblocks, detours and
potholes in our path. These might
be large medical bills, car or home
repairs, a death in the family, loss of a
job, or expensive legal problems. Such
financial emergencies can derail your
efforts to save for retirement or other
goals. Here are some strategies for
managing financial crises.
Establish an emergency fund. This can
lessen the need to dip into retirement
savings for a financial emergency.
Building an emergency fund is tough
if income is tight, but every few dollars
help. Fund it with pay from extra
working hours or a temporary job, a tax
refund, or a raise. Put the money into a
low-risk, accessible account such as a
savings account or money market fund.
Insure yourself. Insurance protects your financial
AUTOMOBILE. Don’t drive “bare.” It’s usually against
assets, such as your retirement funds, by helping to
the law to drive without auto coverage, to say nothing
take care of the really big financial disasters. Here’s a
of being costly if you are in an accident.
list of insurance coverage you should consider buying:
UMBRELLA. This provides additional liability
HEALTH. If you and your family aren’t covered under
coverage, usually through your home or auto insurance
an employer’s policy, at least try to buy catastrophic
policies, in the event you face a lawsuit.
medical coverage on your own.
LIFE. Having life insurance can help you or your
DISABILITY. Did you know you are more likely before
spouse continue to save if either one of you dies
age 65 to miss at least 3 months of work because of a
before retirement. Social Security may be able to pay
disability than you are to die? Social Security Disability benefits to your spouse and/or minor children. On the Insurance can pay you and your family benefits if you
other hand, you may not need life insurance if no one
are severely disabled and are expected to be so for at
depends financially on you. There are many types of
least 12 months. (Worker’s compensation only helps
life insurance, with a variety of fees and commissions
if the disability is work-related.) In addition, your
attached.
employer may offer some disability coverage, but you
may need to supplement it with private coverage.
RENTERS. Homeowners usually are insured against
hazards such as fire, theft, and liability, but the majority
of renters aren’t. Renter’s insurance is inexpensive.
U.S. Department of Labor Employee Benefits Security Administration 25
SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE
LONG-TERM CARE. This insurance can help pay for
Borrow. If you must borrow because of a financial
costly long-term health care either at home or in a
emergency, carefully compare the costs of all options
health-care facility or nursing home. It protects you
available to you.
from draining savings and assets you otherwise could
Sell investments. It’s usually advisable to sell taxable use for retirement.
investments first. Try not to touch your faster growing
retirement accounts. Taking money out of your
retirement accounts could trigger income taxes and
penalties.
If You Choose To Work With A Financial Planner
You are the one ultimately responsible for the management of your own financial af fairs. However, you may want ad ditional help along the way from a professional fi nan cial plan ner. A professional planner can:
• Provide expertise you don’t have.
• Help improve your current financial management.
• Save you time.
• Provide an objective perspective.
• Help you through a financial crisis.
• Motivate you to take action.
For more information, visit CFP Board’s website www.LetsMakeAPlan.org or call
1-800-487-1497 to request free copies of the Consumer Guide to Financial Planning and the Consumer Guide to Financial Self-Defense. The website also contains a wealth of information about financial planning and an advanced search function that enables you to find a financial planner who fits your needs and who will put your interests first.
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A WORKOUT