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Beyond Your Emergency Savings – How to Be Prepared

Brought to you by: The Frugal Buzz On November 10, 2011 Under Frugal Living, Saving

A financial safety net is about more than setting aside money. It’s also about protecting your money and your finances.

Here’s a list of the documents you should have in place and the measures to take to protect you and your family’s financial future:

* Will and Testament
* Living Will/Medical Directive
* Trust
* Home Insurance
* Health Insurance
* Life Insurance
* Auto Insurance

Other documents to consider:

* Long term disability
* Long term care insurance

Insurance protects you and your family against emergency. It is one of the most responsible and financially sound decisions you can make. If you don’t have insurance, consider visiting with an insurance representative for a package deal. If you are insured, consider consulting a financial advisor or insurance agent to make sure you’re properly insured.

Additionally, a will and testament and a medical directive ensure your requests are met. A trust ensures your wishes stay out of court and in the hands of your family.

Throughout this report we’ve discussed several types of savings to have and a tier based system in order of important. We’ve also mentioned where to save your money depending on the savings type. Let’s take a look at that once again so you know all of your options.


Where to Save Your Money

Depending on how much you’re saving, how much access you need to the money, your tolerance for risk and how much interest you want to earn, there are a number of options to save your money.

These options include:

  1. Interest bearing checking account. You can find access to this type of account online or with your local bank or credit union. Research bank fees and interest rates to find the best option for you. This is an ideal account type for a household emergency savings account of $1000 or less.
  2. Money Market Account. These sometimes offer check writing services and offer a higher interest rate than a standard checking or savings account.
    Money Market Funds. Not FDIC insured but generally safe investments. Generally pays more than any type of bank account.
  3. CDs or Certificate of Deposit. They’re federally insured up to $250,000 and have a good interest rate. However, you don’t have easy access to the money. They’re better used for long term savings like saving for the potential loss of income.

What to Not Use to Pay for Financial Emergencies

* Credit Cards
* Home Equity Line of Credit
* Tapping into your 401k or retirement plan
* Postponing other monthly payments

Your financial safety net is established to help you avoid falling into the trap of borrowing to cover emergencies. You don’t have to borrow from yourself or from creditors to stay on solid financial ground.

Conclusion

Financial emergencies happen. They’re a fact of life. When you’re prepared for them, you can focus on getting through the tough times in your life without dealing with the added stress of financial insecurity.

You owe it to yourself, to your family, and to your future to take a look at your financial plan right now. Create a plan to:

* Budget
* Pay off debt
* Save for minor emergencies
* Save for major emergencies
* Protect your finances

Use the three tiered approach, focus on one goal at a time and you’ll be sitting pretty in no time.  This ends our series on preparing for financial emergencies. What do you think? Would love to hear your thoughts.

Frugally yours, Mary

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