Most people don’t plan on losing their job when the economy suffers. In this situation, many people do not have an investment to fall back on. That is why you should plan early in your career how and where to invest. With a good investment plan, you can be certain that you will have a future even if laid off of your job.
How Do You Plan for a Rainy Day?
At Layton Wealth Management, we will help you save for those unexpected crisis. Whether its a layoff at work or an unexpected medical emergency, you should have some money saved to help battle those rainy days. As a rule of thumb, you should have at least two weeks of savings or $1,000 saved away, whichever is greater, to help weather a financial crisis.
Here are some tips for how to save for a rainy day:
- Save SOMETHING: As a rule of thumb, you should try and save at least 10% of your monthly income. Let’s say that you put away $50 a month as a minimum. In ten years, you would have saved at least $12,000.
- Put Your Money In a Safe Place: Even though Certificates of Deposit and Savings Accounts are the safest place to put your money, low interest rates will not let this money grow as fast as it could if you invested in other services. At the end of the day, you will want to consider alternative strategies to maximize the return on your investment.
- Eliminate Unnecessary Expenses: If you have additional expenses each month, it might be best to cut down on these. These may include outings, snacks, and meals out while at work.
The Best Investment Strategy
There is no best investment strategy. With a financial planner, you will be able to get on the road to meeting your investment goals. Here are a few guidelines from a recent article on US News:
- Invest in what you understand.
- Start saving as soon as possible.
- Make sure you are using defensive and offensive strategies.
- Make sure that you understand your cash flow, proper money management, and your tax implications.
- Turn discretionary spending into investing.
- Make sure that your cash reserves and investments are in separate buckets. Your rainy day fund should be separate from your retirement and other savings accounts.
Include Stocks as Part Of Your Strategy
As an investor, you should understand stocks and a financial planner can help you with this. This is the best way to make sure that your savings grow to outpace inflation. Looking back at the Standard and Poor’s 500 index, it has produced an average return of 7.25 percent even through periods like the 1970s. With the annual inflation rate at 3.22%, stocks are a great way to keep your savings and investments valuable, even as costs and the standard of living go up. (1)
(1) Source: http://money.usnews.com/