Category Personal Finance

With the current events and chaos about the COVID-19 and economic downturn, many American families are struggling to make ends meet. There could not have been a better time for people to evaluate their family’s cash flow and find more ways to increase their cash flow during this devastating moment in our country’s history. Personal Cashflow management is a boring thing to do for many people. Do you agree with me?

The Importance Of Personal Cash Flow.

Most people cannot get ahead financially because every month, they have bills to pay. They have phone bills, tax bills, electric bills, gas bills, credit card bills, food bills, and so forth. Every month, most people pay everyone else first and pay themselves last, if they have anything left over. Hence, most people violate the golden rule of personal finance, which is, “Pay yourself first.”

The primary reason most people have money problems is, they were never educated in the science of cash flow management. Many Americans were educated on how to read, write, drive cars, and swim, but they weren’t taught how to manage their cash flow. Without this education, they wind up having money problems, then work harder believing that more money will solve the problem.

This post contains affiliate links. Please please read my Disclaimer for more information.

To save towards your goals, you need to have enough money available with you for investments, and for that too, cash flow understanding is a must. If there’s not enough money then either you have to rework your goals or have to generate enough surplus by following a budgeting technique and both involve personal cash flow understanding. Proper cash flow management begins with knowing the difference between an asset and a liability.

Ways To Improve Personal Cash Flow.

1. Cash Inflow – This refers to cash that flows from another party to your assets
   1. The income you earn from your job, your side hustles like tuition, a weekend job
   2. Cash flow from your savings deposit, stocks, bonds, business, and properties
   3. Reimbursements from your employers, friends to who you lend money.
   4. Gifts received as cash.
2. Cash Outflow – This refers to cash that flows from your assets to another party’s accounts.
   1. Your spending on your family, yourself.
   2. The money you lent to friends and family.
3. Net Cash Flow – This refers to the aggregate of your cash inflow minus cash outflow. If your net cash flow is positive, it’s a good situation to be in. If your net cash flow is negative, there are some personal money management problems there that you need to resolve.

How To Reduce And Eliminate Your Personal Debt.

You should pay off credit card debts, car loans, college loans, and any other loans you might have so the only debt you have left is your home mortgage. Why do we make an exception for home mortgages? Because buying a home is so expensive that most people find it impossible to own a home without first getting a long-term loan from a financial institution.

Your home is also an investment over the long term, so there is good justification for owning rather than renting for so many years. But all other debt besides your home mortgage is manageable – and should be managed aggressively.

Your first priority should be to eliminate debt so you can start your investment program with a clean slate. Your second priority should be to build up a small reserve of cash to fall back on in case of an emergency. Once those two priorities have been met, you’re ready to begin investing in earnest for early retirement.

Live Below Your Means.

Learning to live below your means is crucial if you want to increase your cash. To achieve financial independence you need to build capital, and the only way to do that (without help from an outside source) is to make more than you spend.
The gap between making and spending has to be big enough that you can put a significant amount of money aside every month, year in and year out, for the sole purpose of investing.

One way to increase the make-spend gap is to increase your salary – which is why we suggest you invest in yourself first. The other is to alter your spending habits until you are living well below your means. To achieve financial independence, most people need to tackle the problem from both ends – making more and spending less.

This two-pronged approach gives you the best chance of widening the gap dramatically enough to make a real difference. We’ve already discussed the importance of investing in yourself first, so let’s move on to the other side of the equation, spending less.

Make A Long-Term Investment Plan.

Set a long-term financial goal for where you want to be in 5 years and a smaller, short-term financial goal for where you want to be in 12 months. (The smaller financial goal is a stepping stone along the way to your 5-year goal.) Set goals that are realistic and attainable.

When making a long-term investment plan it helps to be able to clearly state your goal so there is no confusion about where you are heading. For example: “I want to retire in 15 years and have a nest egg of $1.5 million in order to generate $60,000 in income annually.”

To be able to put together a goal statement like this you need to work backward, in essence, and complete three steps:
1. Estimate your yearly income needs once you retire.
2. Calculate your nest egg based on these yearly income needs.
3. Put together a detailed plan outlining how many years it will take to save up your nest egg and how much you’ll need to invest each year.

If you have been actively working for a while now, you may already have an initial sense of the number of years until your target retirement date, but completing this step will help you refine that understanding. By the end of it, you’ll have a much better grasp of how much you’ll need to invest each year to accomplish your goal in the desired number of years.

Increasing Your Cash Flow Is A Decision.

Pay yourself first. Put aside a set percentage from each paycheck or each payment you receive from other sources. Deposit that money into an investment savings account. Once your money goes into the account, and never take it out until you are ready to invest it.

Automating your payments makes it far more likely you won’t skip out on a payment to yourself. It forces your hand in a way, which isn’t all bad when you consider how many other things in life are calling out for you to spend money on them.
The siren call of spending is a little easier to resist if you tie yourself to the mast like Odysseus and give yourself no other choice but to stay the course.

That said, be sure to leave yourself a little buffer when you select your monthly investment amount so you aren’t pushing right up against the limits of what you can handle financially.
Better to select a smaller amount you know you can manage month in and month out than to push too hard and find yourself strapped for cash in any given month.

Consistency is your goal, not stress, and financial hardship. Let your monthly contribution to your future be a positive aspect of your life, something you can feel good about, rather than a negative burden that puts a strain on your existence. You have to start building a realistic budget and cut down on your spending to manage your cash flow and liabilities. It may seem simple, but paying closer attention to your finances could be what will drive you to new hope for a financially free life.

“If you have any feedback about how to increase the cash flow that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

* Saving Your Future ( www.worldsystembuilder.com).

In the past decade, much had been said about wealth and being wealthy, but very few people had been able to acquire wealth and live a life of financial freedom. We know that with the current projection as of 2020, about 1,700 millionaires are made every minute in the United States.

One might be wondering if there’s a wealth formula for building wealth, and why are so many Americans still struggling financially? We will be looking at the understanding of how money works and the wealth formula.

The Wealth Formula.

Money doesn’t grow on trees. You must work for it. If you want to build wealth, there is a formula for you to build on; Money, + Time, +/- Rate of Return, – Inflation,– Tax = Wealth. It doesn’t take a genius to get rich. Nor are exceptional talents required. You don’t need to be lucky. And you certainly don’t need to be privileged. You do, however, have to make getting rich a priority in your life—and be willing to focus the majority of your time and energy on doing what it takes to build real wealth. Let’s breakdown the variables on the wealth formula above;

1. Money – Money is a medium of exchange in the form of coins and banknotes, and if you have a job, your employer pays you with it but, the difference between being wealthy or being financially free will depend on what you do with your money after you are paid.

2. + Time – Money grows over time. That’s why time is one of the most significant variables in the wealth formula. A return on investment for over ten years is going to be more than the return of the same investment if it is kept for just five years. Procrastination is the enemy of saving. When many people are young, they think they have a lot of time to save.

Then they get married, have kids, and buy a house. With a mortgage and new expenses, money becomes tight. They tell themselves they will start saving later. What if they had just put aside $100 or $200 a month when they were young? They could have accumulated significant assets today.

3. +/- Rate Of Return – The rate of return is the return on investment over a period, and it could be profit or loss. It is a percentage of the amount. If the return of investment is positive that means there is again over investment, and if the return is negative that means there is a loss over investment.

4. – Inflation – It is a quantitative measure of the rate at which the average price of goods and services in an economy increases over some period. For example, the price of a car in 1990 is less than the price of a vehicle in 2020. We can see that the purchasing power of our dollar or money decreases over a period when we look at things that we could buy with the same amount of money over time.

5. – Tax – It is an amount of money paid to the government that is based on your income or the cost of goods or services you have bought. Taxes take a big chunk of your money. Any saving and investment strategy must consider the tax impact on it. What is your current tax rate? What will the tax rate be in the future? Will taxes rise or fall?

Each time you are thinking about your worth and building wealth, you must not forget the wealth formula because most millionaires and successful people use this formula in different investment vehicles to build their wealth over time.

This post contains affiliate links. Please please read my Disclaimer for more information.

Are You A Saver Or A Spender?

Where is the money? A good number of people always seem to have money problems. Most of the time, they are short of funds. Warren Buffet advises, “Do not save what is left over after spending, spend what is left after saving”.
As I see it, the wealth-seeking world is divided into two camps. In one, you have the wealth accumulators: men and women who are cautious about spending but eager to save and invest.

The other camp is populated with spenders: men and women who are obsessed with things. They spend all their spare money, and often much more than that, buying things that say “rich” but impoverish them. To become wealthy, first, you need to build a small nest egg by spending less than you earn. Simple, huh? But not if you don’t have the self-discipline to do it.

Meanwhile, keep in mind that even though the material things you hunger for are indisputable of value, unless you have the financial capacity to keep them, to maintain them, and to replace them, you do not have wealth. You simply have its obligations.

Pay Yourself First.

It is advisable to set aside 5 to 10% of your income to save for the future. If possible, save 15% or more. Treat it like a bill that you must pay, and pay it first. That’s your family’s financial bill. Doesn’t it make sense to pay your family first before paying other people’s bills? Your cable TV bill is not more important than your family’s financial well-being.

Buy Only What You Need.

Spending money is a way of life for many people. Shopping becomes a habit. Finding bargains and buying on-sale items don’t always mean that you’re saving. It could be that you’re buying things you don’t necessarily need. Know the difference between what you need and what you want. When a person says they need new shoes, is it truly essential or simply a desire? How many people intend to buy a Toyata but drive home with a Lexus?

Small Changes, Big Money.

Turns out, millennials are not spending all their money only on food and eating out. However, they are a lot more spendy than all other living generations. According to a new analysis from GOBankingRates, millennials spend $208.77each day, on average about $44 more than the average American, who spends about $164.55.

That being said, what if you could make small changes to your spending habits and start saving $10 a day? That’s $300 per month. What if you are able to find an investment vehicle with 8% Rate of return in 30 years, you will have approximately $447,107.

Get Rich Slowly.

Do you want more freedom in your life? Do you want more choice about where you live, how you live, how much you work, and so on? Do you want more leisure in your life? Do you want to end the lifestyle of living from paycheck to paycheck? You don’t want to feel compelled to work 8 or 10 hours every day, or five and six days every week. You want more tranquility in your life.

You would like an end to the stress that the lack of money sometimes causes. You want to be able to sleep easily at night and enjoy your days without worry. These goals are wrapped up very tightly in your desire for financial freedom, and your understanding of how money works and being able to use the wealth formula.

Avoid get-rich-quick impulses. Hot stocks and rising real estate markets can sound appealing, but one wrong pick can set you back big time from your savings goal. Investing is not gambling. You must understand how money works, have a plan, and stay disciplined with your action plan until you reach your goal of financial freedom.

“If you have any feedback about the wealth formula – how money works that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

* Saving Your Future ( www.worldsystembuilder.com).

Since when it was first introduced in 1997 as an insurance product by Transamerica, much has been said about Indexed Universal Life Insurance (IUL), but very few people know this product. And the ones who knew this product don’t understand how it works. This product has been the fastest-growing permanent life insurance product in the industry for the past 23 years.

Indexed Universal life insurance is a type of universal life insurance where rather than your cash value growth based on a fixed interest rate, it’s tied to the performance of the index market like Global Index and S&P 500. You can access this cash value at any time during the length of the policy on a tax-deferred and tax-favored basis.

Unlike other insurance products, you won’t lose money when the market has a downturn. It is because there’s a guarantee applied to your principal, insuring it against losses or market downturn. There’s also a cap, which is the maximum rate used to determine how much excess index interest that an Insurance Company will credit your index account.

Asset Accumulation, Protection, And Flexibility.

Let’s look at a more detailed description of Indexed Universal Life Insurance;

1. A form of permanent life insurance policy that is designed to last your entire life, eliminating the uncertainty of not knowing when you will die and whether your family is financially protected at the time of your death.

2. Includes a savings component designed to accumulate assets in a tax-efficient manner, which can be used for retirement supplementation, education funding, wedding expenses, or any other way you want.

3. The term “Index” signifies that the savings component earns interest that is indirectly tied to the performance of a stock index. This potentially allows for a higher rate of return than traditional fixed rates, which allow assets to grow more rapidly and provides a hedge against inflation.

4. The term “Universal” stands for flexibility. You get to determine, within certain guidelines how much premium to pay, how often to pay a premium, to skip premium altogether, how your assets are invested, when to take money out, how death benefits are paid and in some cases, you can even change the amount of insurance coverage.

When this product is structure properly as an accumulation vehicle, you would want to pay the maximum premium possible while keeping the death benefit to a minimum. This is the key to keeping your policy expenses to a minimum and therefore more premium to be available for your equity-indexed universal life insurance to accumulate.

This post contains affiliate links. Please please read my Disclaimer for more information.

Premium And Flexibility Of (IUL).

The difference between IUL and other permanent life insurance policies is the way interest is credited to the policy. In addition to offering a traditionally declared interest rate, IUL also offers the ability to earn interest that is linked to the movement of a selected stock market index over a specific period of time, usually, 1 year but some policies offer 2 and 5 years periods. Even if the index goes down, your credited interest rate will never be negative, and it is guaranteed. So your worst-case return for a year could be 0%. or 0.75% depending on which insurance company.

 Flexible premium- You can pay more for one month or less the next. Sometimes when you face money problems, you can even skip a few payments as long as the cash value inside the policy is enough to pay for the cost of insurance (COI).
You can adjust your death benefit to fit with life-changing conditions. The interest on the cash value may also be sensitive to market conditions. That allows insurance companies to adjust the interest rate to give higher or lower rates if necessary.

Death Benefit Protection.

1. Permanent Life Insurance (Up to age 121) – If your goal is to protect your family with the flexibility to adapt as life changes, IUL Protect may be the right choice for you. With Index Universal Life Insurance Policy, you get clarity with simple, guaranteed protection so you can live more today, keep more of the money you earn, and gain the potential to build more cash value that you can use it while you are still alive as living benefits.

2. Living Benefits ( Long-Term Care, Chronic, Critical and Terminal illness).

The second form of protection that IUL provides is a relatively new feature in the industry called Living Benefits. Living Benefits are benefits that you don’t have to die to use. Interestingly, this protection benefits you while you are still living rather than only being a benefit that your beneficiaries receive upon your death.

Specifically, you may have options for chronic, critical, and terminal illness and long-term care which you can receive part of your death benefit tax-free while you are living to help pay for medical bills, time off work, or any other reason. Not all companies offer these benefits and, for those companies that do, there is little uniformity of how the benefits are offered and administered. Generally, these additional benefits are offered by the voluntary option of adding insurance riders to your policy.

Cash Value Account (Savings).

1. Interest – Interest is credited to the policy’s index account value is based on the performance of the index chosen and will never be less than zero percent.

2. Liquidity – when you take a withdrawal from your policy, you will permanently reduce the face amount of your policy. The withdrawal will generally be income-tax-free up to the number of premiums that you have paid into the policy. You may also face surrender charges on the amount that you withdraw.
On the other hand, taking loans can be a huge advantage to accessing your cash value and they don’t even need to be repaid. Loans are also not taxable. Just like taking a home equity loan against your home – those loans are not taxable. Now there are generally 2 types of loans. Standard and variable loans. The most commonly used loan in an IUL is the variable loan.

3.Tax Advantage – The tax advantages of insurance are only good if you have gained and a significant accumulation of money. If you have term life insurance, all these tax-free loans, tax-free withdrawals, and tax-deferred earnings are of no use because the Term policy has no cash value account. For those with Permanent Life, if you have little money in it, it also makes little difference.

4. Creditor Protected – This feature will depend on your state. Many states will not allow creditors to come after the money in a life insurance contract.

Why Are Many People Not Buying This Product?

In reality, many policy owners either don’t understand the advantages of Indexed Universal Life Insurance and they don’t have the money to contribute enough to capitalize on the tax advantages. Also, in the past, traditional policies with low-interest rates did not help to accumulate high cash values, so these advantages were not so beneficial.

With the recent introduction of different saving and investment choices, more people can get better cash accumulation and make great use of these tax advantages. Considering the amount of taxes people pay, people must understand and look for financial vehicles whether, in insurance or investment, that can save their future build-up and retirement supplementary income.

“If you have any feedback about how to index universal life insurance works that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

* Saving Your Future ( www.worldsystembuilder.com).

It’s ironic that we live in one of the wealthiest countries in the world, but we always have money problems because of the lack of a solid financial foundation. We can work hard all our lives but retire poor. We do so much to raise our kids just to see them finish college with a lot of debt. Debt becomes a way of life.

We all know that the COVID-19 pandemic has triggered an unprecedented wave of business closures, placing millions of Americans out of work. It has also exposed a deeper, more structural problem with the United States economy that has been looming just beneath the surface for some time. Many Americans are living hand-to-mouth and have almost no savings.

Why Should You Build A Solid Financial Foundation?

According to a recent survey from America Debt Statistics, almost half of the families in the United States live paycheck to paycheck. 19 percent of Americans have zero dollars set aside for an emergency. Two out of ten Americans use at least 50% of their income to pay back what they owe. 13% of Americans expected to be in debt for the rest of their lives.

The cost of raising a child in Americans around $250,000 from birth to age 18. Medical costs have increased by 33% in the past 30 years, while income has only grown by 30%. The average consumer debt is $38,000 excluding mortgages. The average American household mortgage is $189,586. Mortgage debt is the biggest debt in America – with $9.44 trillion owed collectively and 80% of Americans have consumer debt.

We don’t have much, and we don’t know much. Nobody teaches us how to manage our money in schools. Financial issues are not often discussed, and financial products are not always explained. Most people have trouble balancing their own checkbook and reading a financial statement. We use credit cards every day and don’t always understand all the hidden charges.

We buy insurance policies and stick them in a file cabinet. We contribute to our 401k or 403b and hope someone will take care of it. We all want to have a comfortable retirement, but few have a plan. We may be active spenders but passive savers. Building a solid financial foundation will help us reduce or eliminate some of the above-mentioned problems and live a life of financial freedom.

This post contains affiliate links. Please please read my Disclaimer for more information.

Four Pillars Of Building A Solid Financial Foundation.

Many Americans want to build a solid financial foundation or live a life of financial freedom, but few of them don’t know how to do it. Like building a house we must start to build it from the ground up. Here are the four pillars of building a solid financial foundation;

1. Protection – You should have the proper protection in the event of disability, health problems, or premature death. People must prepare in case they die too soon and also if they live too long.

2. Debt Management – You should reduce your liability and get out of debt.

3. Emergency Fund – You should set aside 3 to 6 months of your income to deal with sudden changes in your job or business or to pay for unforeseen accidents or repairs.

4. Investment – You should save and invest for the long run or your future.

A strong financial foundation will build a sturdier, more enduring financial house. Otherwise, it won’t remain standing when the storms, tornadoes, and earthquakes strike. Thus, the 4 financial foundation layers will build a solid ground for your financial future.                              

Understanding How Money Works.

Wealthy people tend to spend time learning and understanding how money works. They look for advice and solutions to get better returns for their money. A lot of poor people lack knowledge about personal finance. Some don’t care to understand. Many have no plan and little savings. What savings they have are usually put into accounts with a low rate of return. Their money doesn’t work for them.

Compounding interest works both ways. It can make you, and it can break you. If you owe money, the compound interest on your debt can ruin you. As a result, many people keep paying the bill with high interest. Despite numerous payments, the balance of the bill barely goes down because high interest on the balance continues to compound. Sometimes, it feels as if it’s impossible to pay the balance off.

The Power Of Compounding Interest And The Rule Of 72.

The Rule of 72 is a simplified way to estimate the doubling of an investment’s value, based on a logarithmic formula.

The Rule of 72 can be applied to investments, inflation, or anything that grows, such as GDP or population.

The formula is useful for understanding the effect of compound interest. Here’s how the rule of 72 works:

Assuming that you saving $10,000, At 1% rate of return, it takes 72 years for $10 to turn into $20,000.

At 4% rate of return, it takes 18 years for money to double. It’s a simple formula. Now, instead of your money doubling once over your lifetime, you could experience two or multiple doubles depending on your rate of return.

At 8% rate of return, it takes half the time, 9 years for money to double. What if your money doubled four or five times in your life? Let’s look at the rule of 72 this way. At 29 years old, if you had $10,000 earning a 4% rate of return, your money would double in 18 years. You would have $20,000 at age 47.

If you earned 8% rate of return, your money would double in only 9 years. At age 38 you would have $20,000. Let’s double it one more time in 9 more years you would have $40,000 at age 47 and one more 9 years $80,000 at age 56. Now you can see the power of the rule of 72 and compounding interest. The more rate of return you earn your money doubles faster.

If you earned 6% on a $10,000 investment, after 36 years, you’ll have $80,000. That’s three doubles in your working lifetime.

If you double your return from 6% to 12% you double every 6 years. Your money could double 7 times in your lifetime. At age 65 you will have $640,000.

The difference between $10,000 at 4% versus 12% is $600,000. $600,000 is equal to 20 years salary of someone who earns $30,000 annually. The Rule of 72 unveils the powerful impact of compounding interest on money. It also reveals 2 types of people. People who don’t understand how money works- end up working for money. And people who understand how money works-they let money work for them.

Be Your Own Money Manager And Control Your Future.

You won’t be free until you are financially free. You can be free from the burden of debt, just start with a simply written budget. Look at your bank accounts, add it all up and see where your money is going. Look at the reality of your situation, and don’t be afraid to make changes. Financial concepts and solutions may not be the most exciting subject, but with discipline and patience, you can learn and understand the fundamentals. And you can build a good financial foundation. Financial independence is not a dream. It is a priority. Take control of your future.

“If you have any feedback about how to build a solid financial foundation that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

According to a brand new survey from Bankrate.com, just 37% of Americans have enough savings to pay for a $500 or $1,000 emergency. And a growing percentage of Americans have no emergency savings whatsoever!

An emergency fund is a financial safety net for future mishaps and unexpected expenses. We need an emergency fund to help us take care of unforeseen circumstances like a health emergency, disability, or job loss, and so on so that they can lead to a lack of revenue.

How Can You Build Your Emergency Fund?

Most financial advisors recommend that we need to save some money aside in a liquid account for the rainy days. And that you can start by saving three to six months of monthly payments for an emergency fund which you can easily access should you have an unforeseen circumstance.

I know you might be wondering how and where can I start saving my emergency fund! Here are a few ideas to help you start building your emergency fund on a daily, weekly, and monthly basis. It’s always a good idea to set a goal and then you can come up with the amount that you want to save regularly later.

1. Look For Easy Places To Cut Or Manage Your Expenses – Make sure you understand the concept of needs and wants and apply it to your spending habits. An emergency fund is one of the pillars of building a financial foundation for our families and our future. Our priority would be to spend more on needs and spend less on wants.

2. Set A Timetable For Your Emergency Fund Savings – The goal is to have at least three to six months of your monthly payments, but you can break it down by setting your saving target and then the amount every week or month. Expect that it will take a while to build a large emergency fund savings, but it starts with you being disciplined and consistent.

3. Open A Separate Account For Emergency Fund – It’s often said the first step is always the hardest. If you combined your emergency fund with your regular savings account, you will be tempted to spend it. It’s advisable to open a separate liquid account where you can easily withdraw money during an emergency situation.

4. Automate Your Emergency Fund Savings – In order to ensure that you really stick to your timetable and build your emergency fund, set up a direct deposit so that a set amount of money from your paycheck is sent directly into your emergency fund account by-weekly or every month. That way, you don’t have to remember to move it yourself each time.

5. You Can Save Your Tax Refund And Company Bonus – Many Americans use their company bonus every year to purchase a lot of liabilities instead of assets. Saving your tax refund is an easy way to boost your emergency fund. During tax season we have the option to have our refund deposited directly into your emergency account.

This post contains affiliate links. Please please read my Disclaimer for more information.

You Don’t Have To Borrow Money Or Use Your Credit Card For Emergency Fund.

Many Americans borrow money or use their credit cards for emergency funds. If you don’t have money in an emergency fund account when disaster strikes, you’ll need to come up with some funds to take care of emergency circumstances.

This could mean selling some of your assets at a loss during times of economic trouble or loss of a job. Not having an emergency fund can force you to accept high-interest rate loans for car repairs or house renovation. Putting a certain percentage of your pay in a liquid account consistently will help you avoid the above-mentioned situation.

How Much Should I Save For Emergency Fund?

There’s no perfect amount for you to save for emergency funds, but banks and financial advisors recommend that three to six months your monthly payments or monthly expenses are the best goal when you start and you can increase it when your income or cash flow increases.

Remember that every family’s financial situation is not the same, so the right amount will depend on your family’s financial circumstances. Let’s assume you lose your job, for instance, you could use the money to pay for necessities while looking for a new job, or your emergency funds could supplement your unemployment benefits.

Why Do I Need An Emergency Fund?

Emergency funds create a financial buffer that can keep you afloat in a time of need without having to rely on credit cards or take out high-interest loans for expensive home repairs.

It should be used during periods of unemployment, medical emergencies, paying for home repairs due to natural disasters, emergency veterinarian bills, and unforeseen vehicle repairs. Without cash on hand to cover unexpected bills, families often end up opting for costly strategies, such as running up credit card balances.

Unexpected Events Can Occur At Any Time.

With the total death toll from coronavirus in the United States now at over one hundred and ninety- two thousand at the time of my writing and with tens of millions of Americans unemployed, it’s no surprise that many people are facing shortfalls when it comes to purchasing food and necessities for their families during the coronavirus pandemic period.

It’s time to act now and take the advice of banks and financial advisors and start saving money for an emergency fund because every family needs to have it now. We don’t know for sure how long this pandemic is going last or when the next one might come, but if we are better informed and prepared, then we will not face the economic devastation that we are seeing today in our country.

“If you have any feedback about the significance of having an emergency fund that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.