No one should go through life without an understanding of their finances and the financial world in general. The team at Broussard Poché, LLP is always here if you have any questions, but let’s go over a few things you should know to help you better understand your finance basics.
Set Aside for Emergencies:
It’s important to have something set aside for an emergency. This could be a lay-off, an accident or a medical emergency. But how much should you save? Conventional wisdom recommends three to six months’ worth of living expenses. However, the answer really depends on your situation. Three to six months is a great idea but if you know your position is fairly secure and you are in overall good health, you may be able to get away with two months. But you should have something on hand if the need arises.
If you have a portfolio, a basic rule to know is that diversification is good. Having a diverse amount of investments helps you manage risk. It helps by spreading your money around through different investments with different levels of liability. The amount of uncertainty never completely goes away, but diversification can help lower the risk.
401(k) Employer Plan:
You should know how much your employer will match your 401(k) contributions. If your plan offers a match, you should try to contribute at least enough to take full advantage of it.
How Much of your bank account is protected?
This is important and the reason why so many use different banks for different accounts. Deposits in banks covered by the Federal Deposit Insurance Corporation are protected up to $250,000. This means that if a bank should fail, the federal government will protect you against losses up to that limit.
It always a good idea to contact a financial advisor with questions, but this is a good place to start your own education. Next time you have an appointment with your tax professional, set aside some time to ask questions and expand your understanding of your own finances.