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The Seasons of Life Call for a Plan

The Seasons of Life Call for a Plan

February 26, 2023

The One Financial Services team knows that at this time of year, we all begin to long for the warmth and color of spring and its many rituals, among them college graduations…

One of the spring rituals of nature is that caterpillars become butterflies. The metamorphosis that occurs changes something dependent into something free to fly away.

That analogy so easily applies to young adults launching into the world for the first time, and an exciting time it is; finding that first job, choosing where to live, and making new friends.

Unlike the process of going from caterpillar to butterfly, becoming a financially independent person is not quite so natural. It takes careful consideration, wise choices, and good planning. And good planning is only as successful as its implementation.

So, after that first job and a place to live are secured, what should be the next priority? Something that not many young adults think about. At One Financial Services, we emphasize to our clients and their new college graduates the importance of creating an emergency fund. 

This is not money put aside for a car repair or a dental bill, this emergency fund is associated with the income disruption of a job loss or change, or a serious injury or illness. Something that, odds are, almost everyone will experience in their lifetime.

Those events beg the question, “How long can you live without a paycheck”?

Begin by saving in a bank where your funds would be easily accessible. Should you ever voluntarily decide to interrupt your income, let’s say by resigning before you had another job or losing your job without sufficient severance, or being injured with no disability insurance, there will be funds available to keep your bill paid during the “interruption.” 

The plan is to build an account that will create an income bridge of at least three months of living expenses. You can do this by starting at the very beginning of your employment and contributing to the account every pay period.

The hope is that you will never need to access it.

Here’s a hypothetical example of how you can start: Let’s say you bring home $750 per week or $3,000 per month. The goal would be to build a $10,000 emergency fund. By saving $60 to $70 per week, or $250 per month, within three and a half years you theoretically would be able to accumulate the amount needed to provide you with a three-month financial bridge.

This is a hypothetical example and is not representative of any specific situation. Your results will vary.

As your career moves forward and your income increases, you should adjust your contributions to your “emergency fund” so that it continues to represent three months of your take-home income.

This way, should your income be disrupted by a crisis, you’ll be able to weather it, and the disruption will not bring on a second crisis of not being able to meet your obligations.

The key to this strategy is to begin at the beginning…from your very first job, not when you’re forty-five and earning an income where accumulating an emergency fund equal to three months’ salary would be much harder to achieve.

At One Financial Services, our team is here to offer you financial advice that has the goal to help to build your assets and protect your future.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.