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A bit of luck … or irresponsibility roulette

In my business of financial planning and budget, I am often reminded of a familiar saying: “Courage is nothing more but a lack of imagination.” And there is a good reason for that. Living in the modern world without planning future moves requires considerable courage. It’s like being blindfold and trying to find a path in the woods.

The world we live in provides us with a lot of creature comforts. There is, how­ever, another side to such comfortable existence – we become too laid back. We forget that things might change. The crisis of 2007 opened our eyes to the fact that comfortable life may not neces­sarily be long-lasting. So let’s not repeat our mistakes and try to realistically evaluate the extent to which our budget is prepared for the possible problems in the future. Such problems may include:

  • loss of income; what will happen if you are left without income for 6-8 months?
  • unforeseen expenses:

~ what if you have to buy another car?

~ what if your house requires an urgent repair?

~ what if… the list can go on and on.

I am not even mentioning possible health problems, children’s education, or buying real estate. These are just sim­ple examples for you to start wondering if your family is well-protected against all kinds of force majeure situations. Have you done everything to make sure you will be able to resolve possible prob­lems?

To my regret, my 35-year experience in analyzing family budgets renders deplor­able results. Most families don’t have sufficient insurance portfolios. Over 90 percent of families lack emergency fund. Most people don’t even understand the importance of having one. It looks like the well-being of such families is based on the ungrounded confidence that nothing unexpected will ever happen. Unfortunately, this is far from the reali­ties of life.

Financial stability of a family is based on income. What if the income is not sufficient for the family budget to be con­sidered well balanced? The answer is obvious: to ensure stability,an additional source is required. In family budgets, such source is the emergency fund (EF). The less stable the income, the higher the importance of having EF.

Mass media abounds in recommenda­tions on how to set up EF. Most of them, however, require no less than 10 years which makes such plans inexpedient as they leave the family unprotected for a lengthy period of time. Fortunately, we live in the country where answers to every question are readily available.The following is the most common recom­mendation for balancing family budget: lack of income is compensated by credit cards.It gives families confidence in the future as they know they have something put away for a rainy day. Two spouses with a good credit score are able to form EF of over $100 thousand within one year (as opposed to 10 years mentioned previously).

Interesting to get EF tomorrow – wel­come on board. Always happy to help you with any issues of family budget.

joseph RozenbergPlease call me for more information: 847-520-7030.
email: mockbajr@gmail.com
site: www.drfgroup.net

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