An emergency fund can best be described as a fund that you set up to take care of your day-to-day or living expenses at a time when your normal source of income is disrupted. Examples of such an emergency could be an illness that outlasts your paid sick leave or when you are unexpectedly retrenched.

Or maybe you have some emergency situation like accident, hit by unexpected disaster.
It will not provide you full solution but at least You can use your emergency fund to tide you over until you can get up and start again.

So how big emergency Fund that you need?
Some financial adviser said we need 3-6 months of our daily expense but some said we need 6-12 months. The amount is depend and what you need, for example if you are single will have different need than if you are married with one income, or married with two incomes. For people who have secure job will put a smaller amount of emergency fund rather than who have unsecure job. So we have no exact amount of emergency fund that we need.

So what we must do to put a good amount for our emergency fund
Some articles that I read suggest that $1000 can be a baby emergency fund. That will help you not use your credit card for paid some unexpected small emergency
such as small car repairs, small home repairs or small medical bill

Then what else that we must considered for emergency fund
* start to count your monthly expenses with go over your past 3 month of bill that will be include (mortgage payment, utilities, groceries, insurance, other expense,
property tax and discretionary expense and yearly expense)

* measure your needed with rule of thumb you should have 3-6 months of living expense. Just in case if you lost your job and it will be hard to
get a new job, and you are the only one who support your family you need to have 6 months until a year saving.

* If you want to find a place to put your emergency fund, consider an important key that you must be able to easily access your emergency fund should the need arise, without incurring expensive penalties. Some of the financial products you should look at to set up your emergency fund include bank investments, money market funds and, in certain circumstances, endowment policies

* revisit your emergency fund once a year and consider upping the amount if life events - like a new baby, new house or new salary - have increased your spending.
Resist the temptation to use the fund for anything other than unbudgeted necessary expenses

source :
CNN
(http://www.nodebtplan.net/2009/04/09/how-much-of-an-emergency-fund-do-i-need/

• 4 comments »

when you think that deposit saving can't afford your future need, its time to have passive income in your life. So you can get higher income with less work. This global crisis forced us to think about it, when fixed deposit can't give us high returned anymore, with worsening global crisis, both government and central bank have a decision to cut off rates

Here some investment that you can consider as investment alternatives, so you can diversify your portfolio and make the money work for them in this uncertainty economics
Money Market Funds
Are unit trust that invest into low-risk, short term debt instruments (they have low risk rating based on Fundsupermart.com's risk rating system). Money market funds invest in short-terms debt of bank, companies and government such as commercial paper, repurchase agreement or treasury bills. This kind of investment suitable for investor who want capital preservation and the ease of liquidity
what about the risk? like other funds, money market funds have risk of poor management, inflation and unguaranteed return


Bond funds
Bond funds are fixed income with lower risk than equity funds. Bonds are debt securities and bond funds invest into variety bonds such as government bond, investment-grade bonds, high yield bonds and emerging market bond. Bond funds usually issued regular dividend and because it invest in different bond issues and the coupon payment and maturities not fixed
Investor have to bear that not all bond fund have same risk and return. The higher return will have the higher risk.

Real estate Investment trust
Reit is a corporation or trust that uses the combined capital of many investor to purchase and manage real estate assets. Like shares REITs offer greater flexibility as they are traded in stock market. And the risk of REITs is volatility as REITs are traded publicly, their price will fluctuate according to market sentiment. Important for investor considering well managed building and good location

High dividend stock funds
as for those who unsure of investing in equities, but are attracted to dividends offered by the stocks

• 0 comments »

As we mention before why we need to saving, The next question how to start make a saving. Ok time to learn it;

STEP !. Figure out where you stand now
The question begin with where does your money come from? It could be from your income, your spouse income, or from other source.
Then where does your money go? (food, housing and utilities, personal care, clothing, education and recreation, medical care, pay loan, saving etc)
The next you must subtract your total income with your total expenditure.
What you get after that?
* If you came out with extra money, that's good for you. So you can put it someplace safe for your future need.
* But if you run out money or there were no saving there is work to be done. Check out all your expenditure, its time to cut down your living expense
Prioritize your expenses. After that, you are ready to figure out how to reduce expense


STEP 2 set goals for saving
It is easier to save when saving for a reason. It could be for retirement plan, education plan, house down payment saving or you just want to buy your household
or anything for your hobbies.
First time you must do, pay your debt first, never forget to pay until your debt overdue. Try to pay more than minimum, it could be up to 15% of your income.In this amount you can get out from your credit card debt quickly.
Then try to put aside 2 month living expense, just in case you lose your job, you still have enough saving to support your living expense until you get a new job

Beside that its wise to have emergency fund separate from your saving, remember once you use your emergency fund, you must replace it.

If all done now you can start to put your saving on your saving post. Make an exact amount, it will drive you to know what you must save
For example :
Retirement saving $ 72000
Education saving $ 30000
home down payment saving $ 20.000
etc
After that you can divide it as long as you want to saving
example
retirement saving $72000. You are at 25 now and will make a saving until 55
So you must saving $2400/year or $200/month

STEP 3 Choose a place to help your money grow
Let us look at the ways beginners to save. Go to the bank, choose the proper bank with a good reputation so you wont worry your money will lose
because the bank bankrupt. Make the different account from your daily account, account to receive your salary or for full fill your daily expenditure.
If you put in the same account you just can draw it, and don't remember its a saving for special purpose.Choose the saving form that suitable to your need

Happy saving!

• 2 comments »

Sometimes we feel hard for saving our money, one reason because we only have a little income. But do you know, saving are most important in you life. Do you realize that we never know what will happen in our future? Sometimes we face emergency problem and we need much money for that. Its ok you can say, we have credit card we can use it for emergency. But think it again, if you use credit card u must pay the bank some interest expense, it means you will spend your money more and more. Plan to have your health care saving and emergency saving.

Another reason why you need to save money are your kids. You must prepare a big sum educational saving for their education. It is not a little amount, because inflation will go high when your kids really need your support for your education. Don't screw up your kids' future because you have no proper educational saving plan for their college.


Thinking to have an own house? Must be. You won't rent a house for your entire life isn't it? You need to have a home saving too for your down payment. Its a huge amount of money, especially if you want to put a bigger down payment so you will have a smaller amount in your installment. You must have a brief plan so have no difficulties to buy your dream house.

And most important for your consideration, you not life only for this time, when you still have a job and earn your money. You need to think about your retirement saving. But as we know, it is difficult to start, as we save for a car and then a house. And soon after, there will be educational expenses for kids. But you cannot afford to keep postponing your financial planning for retirement saving. In order to have sufficient income to cover all those non-working years, you cannot leave the plan to the very last moment

Start to save your money regularly and put it in the correct post to reach your goal, left your habit only to save occasionally when you have your income left.
from now own, put our money saving for the first place, and the rest of it we can spend it as our daily expenditure.

• 3 comments »