Although Mark was talking about parenting, I thought about some of the guardrails and rumble strips that we have in our financial lives that keep us from going over the financial cliff. Here are a few that crossed my mind:
- Emergency or Rainy Day Fund - This fund is money that is saved for emergencies. $1,000 is a great starting point, but it should grow to several months worth of expenses. This fund provides payment for car repairs or for roof repairs or for expenses in the case of lost income. It guards against using debt to fund emergency expenses.
- Insurance - Auto, home, health and life insurance guard against catastrophic loss caused by events that can't be predicted or controlled. These are important safeguards.
- A will - An important safeguard against the inappropriate and unwanted treatement of children, life insurance, and other assets when someone dies. Parents have a responsibility to their children to have a will in place. My wife and I don't have a lot of money, but we do have children, life insurance, and a will. We want to control what happens to those things if something happens to us.
- A Budget or Spending Plan - Guards against ending up in a financial crisis by requiring a plan for each dollar that is earned and disallowing expenses to be greater than income. Helps to safeguard against using debt to fund expenses.
- Long Term Financial Plan and Investing - Another safeguard against using debt to fund future expenses. Guards against a future with no plan and no money to fund it. It is each individual's responsibility to plan for and fund his or her future - no one else's.
- Debit Cards - Help Guard against using credit card debt while providing the ease of use and convenience of a credit card.
1 comment:
These are all vital components being financial responsible and stress free when it comes to finances. The main rule, work you hardest, expect the worst, and claim victory for planning in advance.
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