Friday, October 19, 2018

Could You Handle No Income For Six Months?

June 27, 2017 by  
Filed under Business, Money, Opinion, Weekly Columns

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(ThyBlackMan.comPart of the benefit of financial planning is that it not only ensures you live the best life possible when things are going well, but it helps to protect you for the future. You have the opportunity to make the most of the moment, while knowing there is a safety net in place that can catch you if there’s ever any chance of you falling. Mostly, we hope we don’t fall and never have reason to test out just how secure that net is – but what would happen if it were completely tested?

The idea of going without income for six months is a problem that many families have to face up to in the modern world. There is evidence that we now live in a country that feels more and more insecure, a situation which isn’t helped by the turmoil of the political reality at the present time. So what if your luck flipped and suddenly, you didn’t have any income for six months? Could you cope?

For the vast majority of families, the answer is “no”. In fact, for many families they couldn’t manage for six weeks without an income, never mind six months. Six weeks is a very realistic figure to have to cope without income; even in high-turnover businesses like retail and hospitality, it takes around six weeks on average to find a new job. If your work is more specialized, the loss of your income could easily take six months to replace.

So given how much of a loss six months is in real terms, is there anything a family can ever do to try and protect themselves? What can you do right now to ensure your family could get through a period of extended hardship?

Goal One: Obtain All Monies Owed To You

The first thing you can do is to call in any debts and track down all money that’s currently owed to you. This could be from loans to friends that have never been paid back; wages or overtime money you’ve never received; using an injury lawyer to help secure a payout you’re owed from an accident; ensuring all refunds banks or stores have owed you have been processed. This can take a lot of time to go through, but most people – unless they tend to be incredibly on-the-ball financially – will find some money from this glance through their finances.

Goal Two: Save Every Cent (And Add More If Possible)

With your newly-found money, save it, every single cent of it. If you can add more from other sources – such as your checking account – then do that too. Then, protect it. This becomes your emergency fund. It’s different from normal savings or the money you have to live on – its entire purpose is, hopefully, not to be used at all. It’s just going to be there if you find yourself suddenly without income. It makes sense to store this in a separate account away from your main banking, so you’re not tempted to dip into it.

Goal Three: Add To It

Small amounts are the name of the game for an emergency fund, so $3 here or $7 there. Send it to the emergency fund and forget about it. With the baseline amount you established on the first goal, soon, it will begin to grow – and that’s your special, dedicated protection against a long period without income.

Staff Writer; Larry Ball

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