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Moving Forward
Some life transitions are planned, but a job loss or divorce can be sudden and unexpected. One common thread that accompanies all transitions, however, is concern with whether there will be enough money to maintain your lifestyle.
Although life changes can be challenging, you can minimize the financial pressures by planning how you will allocate your resources during the time of transition. By determining how much it will cost you to get from point A to point B, you can tweak your financial plan to make it feasible.
When your spouse or a family member dies, you'll need to handle numerous financial and legal matters.
You might view divorce as a series of distinct steps, yet still more work remains after divorce.
The keys to surviving a job loss financially are to plan ahead, take stock of your income and cut your expenses.
There's no escaping the fact that a crisis is a life-changing event, but how you handle a crisis financially will determine if your life changes for the better.
Balancing Priorities
When it comes to personal finances, 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 toward their retirement goals is one of the biggest dilemmas they face.
Emergency Savings First
Here are a few reasons why emergency savings should come first:
- 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.
- Protection 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.
- 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 Savings First
There are also some good reasons why focusing on your retirement goals first can make sense:
- Time value of money: The earlier you start saving for retirement, the more time your money has to grow.
- Compound interest: The power of compound interest can make a big difference in the amount you have saved when you retire.
- Employer matching: If you participate in a retirement plan at work, your employer may match a portion of your contributions and this can significantly increase your retirement savings
How Much do I Need for Emergencies?
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