During my networking travels through Queens, I listen and learn about different areas of business and finance, which I pass on in my column. This week, I am going to talk about having an emergency fund.
We all need an emergency fund, whether you are living from paycheck to paycheck or think you are fine. We all need to set aside money for a rainy day. In this volatile climate, you could get laid off or lose your job.
I have a friend from Bayside who is married with a 1-year-old daughter and made $120,000 per year. Bear Stearns folded and his firm took their top officers, leaving him jobless. I have another friend, in Whitestone, who got hit owing several thousand dollars to the IRS.
Put money aside for an emergency. If you think you do not have any cash to save now for an emergency, then where will the money come from? Do not think you will get money from a cash advance on your credit card. You will only have financially compounded your problem by going deeper into debt.
Also, do not think your retirement account is a bailout. You will pay penalties and/or taxes if you tap into your IRA or 401(k) before retirement.
The best thing to do is take a small percentage of every dollar that comes from your paycheck, tax returns, money windfalls, etc. Be disciplined and use the exact same percentage, from 5 percent to maybe 15 percent. Whatever percentage you settle on, take those monies and tuck them away in a money market.
Use emergency fund monies only if you absolutely need to. If you never have an emergency, then you just created another retirement plan.
So How's Business regarding establishing an emergency fund? Put an emergency fund in place when you are starting out or living from paycheck to paycheck. An unforeseen event could devastate your finances, forcing you to borrow money early on, which starts you financially behind the eight ball.
Reach Joe Palumbo at 516-248-0256 or info@camel
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