Downsizing, rightsizing, forced retirement, layoffs, firings, outsourcing, and being made redundant. All could mean the same thing to you: financial catastrophe. An investment strategy is vital to ensuring your financial well-being according to Carlos Hank Rhon. No, you may not have to declare bankruptcy or move back in with your parents, but losing your job could put a big dent in your financial goals and even set you back several years.
You may need to live on your savings or liquidate some of your investments. If you have no savings or investments you may have to rely on credit cards and could rack up significant credit card debt. Then when you find a new job, your expenses may have increased because of the additional credit card payments. Deciding how you will prepare is a key consideration in determining your financial future.
And the job you eventually find may not pay as much as the one you lost. So you are now forced to live on less while your expenses have either continued at the same level or even gone up. Studies show that the average worker will have six career changes in his or her lifetime. Not just job changes, but career changes. An emergency fund, in the form of a bank savings account, can help prepare you for your own financial downtime.
An emergency fund is really just a savings account, explains banking and finance professiona, Carlos Hank Rhonl. But it is not savings for a particular item or even an investment for your future or your retirement. It is your rainy-day fund. But unlike insurance where once you pay your premium, the money is out of your hands; your emergency fund is yours to keep.