Your Emergency Fund: How Much is Enough?

A tax refund isn’t winning the lottery. It isn’t a gift. It’s the return of your money, money that you’ve earned that the government has been holding. At a time when you need your money to be working for you, you can’t afford to have your money do nothing, not even earn interest. Rather, your money needs to be working towards your financial freedom.

The issue with a large tax refund is that the money that has been withheld throughout the year could have been working for you all along. Rather than have it deducted, you could have been paying down debt, contributing to your emergency fund or investing it for your future. Yes, you can definitely do those same things with your tax refund. However, now you’ve missed out on the time your money was being held where it could have been earning interest or saving you money by paying off debt sooner.

While I am a firm believer in minimizing your withholdings throughout the year, I know that this shines a light on an individual’s sense of discipline. You need to make sure that you’re applying the additional funds where they need to go, which is not the retail fund or other expenses that aren’t working towards your future. Automatic transfers for both savings and investment accounts make it convenient to get your money to work for you. Another consequence of having a minimal amount withheld throughout the year is that you could owe the government come tax season. Once again, this supports the need for saving and being disciplined with your money.

You’ve put in a lot of hard work for your money. Not only should it be a means to your financial independence, it should be a tool that you can access right away. Take advantage of your money today to ensure that you get where you want to go tomorrow.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Insurance is a necessary component to creating a financial plan that works well for you, your family, and your long-term goals. It can take just one illness, one job loss, or one car accident to turn your world upside down and crumble your financial plan.

If you have the proper insurance in place from the start, however, you can weather these life-changing moments and keep your goals and dreams on the right trajectory.

1. Auto Insurance – Auto insurance is a must and not just because the law requires that you carry it. Auto insurance can protect your assets in the case of an accident and make sure that not only can you shoulder liability in an accident but you can also get back on the road with a car that will carry you safely to and from work. Full coverage is especially important if you owe money on your vehicle. No one wants to keep making car payments on a vehicle that was totaled in an accident.
2. Homeowners or Renters Insurance – You have worked hard to provide for your family and homeowners and renters insurance can protect you and get you back to where you were in the case of a natural disaster or a home break-in. Depending on where you live, you have seen the damage that can be done by tornadoes, earthquakes, floods, and more. Be sure to check that your policy covers the weather most likely to wreak havoc in your neck of the woods.
3. Life Insurance – Life insurance is absolutely necessary for any individual who supports another individual. So, if you are married or you have dependents, then you definitely want to make sure that their needs are covered if you meet an untimely death. Think about what life would be like for your dependents without your income and choose the amount of life insurance that you need accordingly.
4. Health Insurance – Health insurance is such a smart choice. Medical costs have skyrocketed and long-term illness or serious injury can drain your savings fast. Having health insurance goes a long way in keeping your household doing well financially in the midst of a health crisis. If you do not receive health insurance through your employer, take the time to talk to your insurance agent about it.
5. Disability Insurance – If you work you may already be getting this type of insurance through your employer. Look at the specific plan and if you are not getting enough coverage through your workplace then you may want to consider getting some through your agent or broker.

Disability insurance is important because it keeps your household operating during a long absence from work due to illness or injury.

Now is the time to make sure all of your “insurance ducks” are in a row. Catastrophe may never hit, but if it does, you want to make sure that you and your family are covered.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.