An emergency fund acts as a financial safety net, empowering you to manage these unforeseen costs without resorting to high-interest debt options like credit cards or loans. Building an emergency fund requires a systematic approach, and here’s how you can do it in five practical steps:

1. Decide How Much to Save

The first step in creating an emergency fund is to determine the amount you need to save. A common guideline is to have enough to cover three to six months of living expenses. This figure should include rent, utilities, groceries, and any other regular expenses that would need to be paid even during a period of financial distress. To personalize your fund, consider your job security, the stability of your income, and any dependents who rely on your earnings.

2. Set Your Savings Target

Once you know how much you need to save, the next step is to set a realistic timeline for achieving this goal. Start by reviewing your budget to see how much you can comfortably set aside each month without compromising your daily financial health. For some, this might be a modest amount, while others might be able to save more aggressively. The key is consistency; even small amounts can grow significantly over time due to the power of compound interest.

3. Choose Where to Keep Your Fund

The ideal location for your emergency fund is somewhere accessible but not too easily spent. High-yield savings accounts are a popular choice because they offer higher interest rates than regular savings accounts, helping your fund grow faster. These accounts also provide liquidity, allowing you to withdraw funds quickly and without penalties in case of an emergency.

4. Open Your Account

With a clear idea of where to keep your emergency fund, the next step is to open an account. Look for banks that offer competitive interest rates and low fees. Online banks often provide higher yields than traditional brick-and-mortar banks. Ensure that any account you choose is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) for added security.

5. Know When to Use the Fund

Finally, establish clear guidelines for when to use your emergency fund. It should only be used for true emergencies, such as unexpected medical expenses, crucial home repairs, or during a job loss—not for planned expenses or discretionary spending. After an emergency, focus on rebuilding the fund as soon as your financial situation stabilizes.

For Financial Confidence

Building and maintaining an emergency fund is a fundamental aspect of sound financial planning. It provides not just financial security, but also confidence, knowing that you are prepared for life’s unexpected events. Start small, be consistent, and watch your safety net grow. This disciplined approach can help you work to avoid costly financial decisions and encourage stability in turbulent times. If you have questions about your emergency fund or starting one, we would love to meet with you!

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

This article was prepared by FMeX.

LPL Tracking #596440

The post Five Practical Steps to Build an Emergency Fund appeared first on Choice Bank.

We’re living through interesting economic times. On the one hand, markets can be unpredictable and volatile. On the other hand, economic conditions are constantly changing. More than ever, people are asking: “How much money should I keep in cash?”

Believe it or not, the answer is the same in turbulent times as it is in relatively calm periods. And it’s the same regardless of how “cautious” or “risky” your investment style might be. When it comes to how much you should keep in cash, you don’t want too much or too little — you want a “just right” amount based on your own budget and financial goals.

Source: BlackRock DC Pulse Survey. 2021: Merril Lynch, “Women & Financial Wellness: Beyond the Bottom Line,” 2021.

The Importance of Cash in Your Portfolio

Cash serves as the foundation of a solid financial plan. It can provide liquidity, safety, and confidence. Having cash on hand can help you manage everyday expenses, handle emergencies, and take advantage of investment opportunities without the need to sell off other assets.

Finding the “Just Right” Amount

Emergency Fund: Financial professionals typically recommend having three to six months’ worth of living expenses in an emergency fund. This ensures that you have enough to cover unexpected expenses like medical bills, car repairs, or temporary loss of income. If your job is less stable or you have dependents, consider aiming for six to twelve months’ worth of expenses.

Short-Term Goals: If you have short-term financial goals, such as buying a house, taking a vacation, or making a large purchase within the next year or two, it’s wise to keep that money in cash. This way, you won’t have to worry about market fluctuations affecting your ability to reach those goals.

Peace of Mind: Some people prefer to keep a little extra cash on hand simply for peace of mind. This isn’t necessarily about financial logic but rather about emotional comfort. If having an additional cushion makes you feel more secure, it’s worth considering.

Balancing Cash with Investments

While it’s important to have enough cash to cover your bases, keeping too much in cash can also be detrimental. Cash typically earns very low returns compared to investments like stocks or bonds, meaning you could be missing out on potential growth. Here are a few tips to help you find the right balance:

• Assess Your Risk Tolerance: Your risk tolerance should guide how much you keep in cash versus investments. If you’re more risk-averse, you might prefer to keep a bit more in cash. If you’re comfortable with risk, you might lean towards investing more of your money.
• Diversify Your Investments: Diversification can help manage risk while aiming for growth. By spreading your investments across different asset classes, you can potentially mitigate the impact of market volatility.
• Regularly Review Your Financial Plan: Economic conditions and personal circumstances change, so it’s important to review your financial plan regularly. Make adjustments as needed so your cash reserves and investments align with your current goals and situation.

Determining the right amount of cash to keep on hand is a personal decision that depends on your unique financial situation and goals. By maintaining an emergency fund, setting aside money for short-term goals, and balancing your cash reserves with investments, you can navigate economic uncertainties with confidence. Remember, the goal is to find that “just right” amount that provides both security and opportunity, allowing you to pursue financial stability and growth.

Investing is a journey, and keeping a thoughtful balance of cash and investments is key to reaching your destination. If you have any doubts or need personalized advice, consider consulting with a financial professional to tailor a strategy that suits your needs.

So How Much Should You Keep in Cash?

The exact amount to keep in checking and savings will be different for everyone, but it’s always the sum of three things:

1. Money for Everyday Living Expenses. This is the cash you use to pay your bills and cover your everyday living expenses. It’s important to have enough in your checking account to handle your monthly outflows without dipping into your savings or investments.
2. Your Emergency Fund. An emergency fund is crucial for financial stability. The exact amount you need will vary depending on your personal situation, but we typically recommend aiming for three to six months’ worth of take-home pay. If you’re self-employed or have an irregular income, consider saving up to nine months’ worth of expenses.
   Keeping your emergency fund separate from other funds set aside for other goals will give you a clear picture of how much you’ve reserved specifically for emergencies.
3. Money Needed Within the Next Two Years. Any money you’ll need within the next two years should also be kept in cash. This includes funds for short-term goals such as vacation savings, next year’s car insurance, or any other expenses you anticipate.

Investing is a long-term game, so it’s generally better to invest money for timelines longer than two years. As you approach the last year or two of a long-term investing goal, consider withdrawing it as cash or leaving it invested in a conservative portfolio. Discuss your best next move with your financial expert to help you make the most strategic decision.

Balancing Act

Determining how much cash to keep on hand involves balancing your immediate needs, emergency preparedness, and short-term goals. By ensuring you have enough for everyday expenses, an adequate emergency fund, and funds for short-term goals, you can pursue a balance that provides both security and flexibility. This approach allows you to navigate economic uncertainties and work toward your financial goals with confidence.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This article was prepared by FMeX.

LPL Tracking #596440

The post How Much Money Should You Keep in Cash? appeared first on Choice Bank.

An emergency fund acts as a financial safety net, empowering you to manage these unforeseen costs without resorting to high-interest debt options like credit cards or loans.

1. Decide How Much to Save

The first step in creating an emergency fund is to determine the amount you need to save. A common guideline is to have enough to cover three to six months of living expenses. This figure should include rent, utilities, groceries, and any other regular expenses that would need to be paid even during a period of financial distress. To personalize your fund, consider your job security, the stability of your income, and any dependents who rely on your earnings.

2. Set Your Savings Target

Once you know how much you need to save, the next step is to set a realistic timeline for achieving this goal. Start by reviewing your budget to see how much you can comfortably set aside each month without compromising your daily financial health.

For some, this might be a modest amount, while others might be able to save more aggressively. The key is consistency; even small amounts can grow significantly over time due to the power of compound interest.

3. Choose Where to Keep Your Fund

The ideal location for your emergency fund is somewhere accessible but not too easily spent. High-yield savings accounts are a popular choice because they offer higher interest rates than regular savings accounts, helping your fund grow faster. These accounts also provide liquidity, allowing you to withdraw funds quickly and without penalties in case of an emergency.

4. Open Your Account

With a clear idea of where to keep your emergency fund, the next step is to open an account. Look for banks that offer competitive interest rates and low fees. Online banks often provide higher yields than traditional brick-and-mortar banks. Ensure that any account you choose is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) for added security.

5. Know When to Use the Fund

Finally, establish clear guidelines for when to use your emergency fund. It should only be used for true emergencies, such as unexpected medical expenses, crucial home repairs, or during a job loss – not for planned expenses or discretionary spending. After an emergency, focus on rebuilding the fund as soon as your financial situation stabilizes.

Financial Planning Matters

Building and maintaining an emergency fund is a fundamental aspect of a sound financial strategy. It provides not just financial confidence, but potentially may lead to less stress, knowing that you are prepared for life’s unexpected events. Start small, be consistent, and watch your safety net grow. We would love to discuss your financial plan, meet with an advisor to get started!

Important Disclosures:

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

This article was prepared by FMeX.

LPL Tracking #583286

The post Five Easy Steps to Building Your Emergency Fund appeared first on Choice Bank.

When it comes to personal finance, there are a number of competing priorities that can make it difficult to determine where to focus your efforts. For many people, the choice between building emergency savings and working towards their retirement goals is one of the biggest dilemmas they face. So, which should you focus on first?

In order to answer this question, it’s important to understand what emergency savings and retirement goals are and why they are both important. Emergency savings refers to the amount of money you have set aside in a readily accessible account to cover unexpected expenses such as a job loss, medical emergency, or major home repair. Retirement goals, on the other hand, are the plans you have in place to provide for yourself financially once you stop working.

Both emergency savings and retirement goals are important, but the order in which you focus on them will depend on your individual financial situation. If you have a stable income and few financial obligations, you may be able to focus more on your retirement goals, knowing that you have a safety net in place in the form of your emergency savings. However, if you have limited income and high debt, you may need to prioritize building up your emergency savings in order to protect yourself from financial shocks.

Emergency Savings First

Here are a few reasons why emergency savings should come first:

1. Peace of mind. Having a solid emergency fund in place can help you sleep better at night, knowing that you have a safety net in case of an unexpected expense.
2. Protects against debt. If you don’t have emergency savings, you may turn to credit cards or loans to cover unexpected expenses, which can quickly spiral into debt. Building up your emergency savings can help you avoid this trap.
3. Provides flexibility. With an emergency fund in place, you have more flexibility to make decisions about your financial future, such as taking on a new job or starting a new business.

Retirement Goals First

However, there are also some good reasons why focusing on your retirement goals first can make sense:

1. Time value of money. The earlier you start saving for retirement, the more time your money has to grow, which can make a big difference in the amount you have saved when you retire.
2. Compound interest. The power of compound interest means that the earlier you start saving, the less you have to save each month in order to work towards your goals.
3. Employer matching. If you participate in a 401(k) or other retirement plan at work, your employer may match a portion of your contributions. By maximizing this match, you can significantly increase your retirement savings.

Emergency Savings vs. Retirement Goals

So, which should come first? Ultimately, the answer will depend on your individual financial situation and goals. In any case, it’s important to find a balance between the two. You don’t want to neglect your emergency savings and end up in debt when an unexpected expense arises, but you also don’t want to neglect your retirement savings and end up struggling to make ends meet in your later years. A good rule of thumb is to aim to have three to six months of living expenses in your emergency fund, and then start contributing to your retirement goals as soon as you can.

Important Disclosures

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

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This article was prepared by FMeX.

LPL Tracking #1-05358627

The post Emergency Savings or Your Retirement Goals? appeared first on Choice Bank.