Enhancing Investor Awareness

According to the Bureau of Labor Statistics, more than 5.7 million Americans have been unemployed for 27 weeks or longer. That’s nearly seven months with no income. Previously, financial advisors had suggested a rainy-day fund consisting of six months of living expenses, but if you become one of the statistics, you can run out of money before you find a new job.

These days, many financial advisors are suggesting that their clients have nine months to one year of income in liquid assets available should they lose their jobs. If you don’t have enough money available, the likelihood is that you’ll have to live on credit cards, which will put you behind the eight ball when that new job appears.

Bankrate’s February Financial Security Index stated that 54% of Americans reported that they have more money in emergency savings than in credit card debt. One in four Americans has more credit card debt than emergency savings, up a bit from 23% last year. If you have debt to pay off, you will need to manage that while building your savings account, so working with an advisor can be beneficial.

How much should you save? If you don’t already have a go-to fund in case of an emergency, you naturally can’t build it overnight. Start by saving as much as you can, whether that’s $100 a month or 10% of your income, until you have what you need. Any amount will help avoid a downward spiral into accruing additional debt should you lose your job.

If you’re self-employed or a business owner, your position is not guaranteed either. Business owners should have enough in a reserve fund to pay for operational costs as well as payroll for six months to a year.

Have questions about how to build your rainy-day fund and make sound fiscal decisions? Contact Cambridge Wealth Management to schedule your consultation.

There are many ways you can receive a windfall and be looking at a large sum of money falling into your lap: an inheritance, a trust fund, winning the lottery, or selling stocks may be some of the ways you can “come into money.” While it’s exciting to think about receiving hundreds of thousands or even millions of dollars, the question is: How do you responsibly manage that money so that it doesn’t disappear just as quickly as it appeared?

Don’t Start Spending It
Although you may have already thought of that great car, house, vacation, etc. you’ve been wanting, hold off spending your newly acquired money until you’ve had time to establish a plan for the funds. Perhaps you can buy those toys you want, but before you do, create short- and long-term plans for the money so that you will have it for a while.

Don’t Invest Too Quickly
Everyone in the world may be clamoring to tell you about the next “guaranteed” investment idea for your money, but be sure that you examine all of the options first. Sit down with your financial advisor to discuss the pros and cons of any investments, whether they are with a well-known company or your best friend’s start-up.

Find Out How Much You REALLY Have
When you receive a lump sum of $1 million, you don’t really have $1 million. You may be facing a variety of taxes and fees, which can drastically lower your final amount. Before you start spending, investing, or planning anything, do a real-world calculation on the amount of money you’ll have after everything’s been taken out.

Spread the Wealth
There are a variety of great things you can do with your money, but don’t put all of your eggs in one basket. You will likely end up spending some, saving some, investing some, and giving some to charitable causes. How you distribute your funds can play a part in taxes, as well, so be sure to consult a qualified financial advisor first so you can cover yourself and maximize the amount you have.

If you’ve recently received—or expect to receive—a large sum of money, we can help you weigh all of your options. Contact Cambridge Wealth Management to schedule a consultation.