Safety Net

Money Talk

 Roni M. Benjamin

 What is your plan to handle your next inevitable crisis? Create a safety net with your emergency fund. For years, I did not value the benefits and resources money could afford my family and me. I will admit I mismanaged my income by overspending on entertainment, eating out, groceries, clothing, etc. I avoided thinking about or planning for the unexpected. This behavior cost me greatly. I missed out on lucrative business opportunities, paid higher interest on loans, and was not a good source of relief for my family in need. Humans are creatures of habit. Change, however, is inevitable. Whether it is a pandemic, job loss, or changes in the market that impact your ability to create income, life without an emergency fund is risky. There are great relief and safety in having a financial plan, but more importantly, a strategy. Start with a budget. There are digital tools available, or you can go old school like me and use an excel budget sheet. 

You may be wondering how much should I set aside for a safety net? Ideally, you want to set aside enough emergency cash in your checking or savings account to cover six months of your income or your living expenses. A twelve-month cushion may be more sensible for small business owners or those working in highly unpredictable industries. The simplest way to get started is to put aside an exact amount each month into a separate account. Nickname the account “emergency fund” if you must. Now, if you are interested in accelerating the process, consider depositing all or a portion of your tax refund and employment bonus into this account. Typically, this is money that doesn’t fall inside your regular monthly budget, and it is often much easier to save these bonuses without feeling deprived.

On the other hand, you may be able to use the built-up cash value in a whole life or universal life insurance policy as a source of funds in an emergency. A policy’s cash value accumulates over time, and unlike a bank loan, you do not have to pay back a loan against the cash value, and withdrawals are tax-free. Understand that when you borrow against your policy’s cash value, it will reduce the death benefit your loved ones receive.

Another suggestion would be to establish a personal line of credit or a home equity line of credit. These are not for everyday purposes, of course, but in case of a true financial emergency. Be responsible if this is your choice. Pay on time and use less than 30 percent of the available credit to maintain a great credit score. Credit experts will concur.

Do not wait until it is too late and an emergency presents itself. Procrastination is the enemy of success. Success is having a well-thought-out financial plan for the unforeseen. By having enough funds set aside for immediate but unexpected cash needs, you’ll be in a much better position to weather short-term financial turmoil and market volatility while remaining on track toward your long-term goals and objectives. 

As a Financial Professional, I am committed to helping individuals and business owners build a solid financial house one phase at a time. Regardless of your location in the country, if anything you read resonates with you or incites you to move to action, I encourage you to reach out to me. Together let’s create a plan specific to your needs.

I am a financial services professional committed to helping individuals and businesses build a solid financial house and leave a legacy for their children’s children. I don’t know where you’re located in the world, but if anything mentioned resonates with you or incites you to move to action, I encourage you to reach out to me. Together, let’s create a plan for you and your family specific to your needs.

Licensed New York Life Insurance Company Agent

Financial Editor, Author, Speaker, Entrepreneur, and winner of Dr. Boyce Watkins’ 2020 #BlackOwnedBusiness Pitch Competition

Call or text (770) 685-5532