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Helping Family Doesn’t Have to Mean Breaking the Budget

Helping Family Doesn’t Have to Mean Breaking the Budget

| February 11, 2022
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It can be tempting to help friends or family in their time of financial need. So how do you balance that with staying on track with your own goals? After all, you’ve worked hard to get where you are, and have a vision of where you want to be. Someone else’s short-term pain can impact your long-term gain if you’re not careful. Consider building an emergency fund as part of your financial plan, either for yourself or other loved ones.

An emergency fund should not be confused with a budgeted expense. Those need to be saved for separately—things like big vacations, home improvements, routine car maintenance, or a new piece of furniture. This is strictly for situations beyond your control, or things you didn’t see coming. So where is this money going to come from? It’s not as hard to build an emergency fund as you might think. It just requires discipline and focus.

Where Do I Get It?

Make it part of your budget, just as you would any other expense. Start with a realistic target amount, so you can achieve it and feel successful. You might consider paying some other debt off first, such as credit cards, so you can save more by getting rid of interest charges. When you reach your first goal, stretch a bit more—you’ll soon have a reserve you can lean on if you need it. A word of warning: it can be tempting to see this as a piggy bank for other purposes, but resist that thought by remembering the fund is there to relieve undue financial stress.

Where Do I Put It?

The most convenient and accessible place to put an emergency fund is in a traditional savings account, which has low growth potential, but also has absolute liquidity. You may want to avoid placing it in accounts such as CDs which may not be accessed for months or years, or in retirement accounts that may bring a hefty penalty for early withdrawal. A money market fund is another option. It tends to offer more growth potential than a savings account; but since it’s an investment account, you could also lose part of your initial investment. Weighing your individual risk tolerance can help you decide which option is best for you.

Kinecta Wealth Management can help you structure an emergency fund as part of your overall wealth plan. We specialize in building diversified portfolios and can help you find your best recipe to work toward financial independence. We will listen to your story and help you create a tailored investment plan based on your goals and your tolerance for risk. We will also stay with you as your investments mature, explaining changes, offering adjustments, and refreshing your plan as situations and circumstances of your life change. Come in and let’s start a conversation about building your personal success story.

This material was prepared for Kinecta Wealth Management's use.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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