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On Being Prepared:

FINANCIAL PLANNING IS THE ACT OF LOOKING AT how you are living today, taking into account all expenditures in the future as well as inflation, college expenses, retirement planning, and other usually unforeseen circumstances and devise a plan to get where you want to go. Along the way, we get used to a lifestyle that usually coincides with our income. If you remove the income portion, in comes the hard times. The key is to living reasonably is always keeping in mind that life could change in a flash: job loss, health related catastrophe, loss of a family member, or any other unforeseen issues- which is why they call them unforeseen. If you don’t spend as quickly as you make it, you leave yourself a cushion to fall back on should the unexpected happen. Rule of thumb is to have at least 6 months of your household expenses in a separate account in a liquid holding account like a savings or money market account. Don’t worry about the opportunity loss of low interest: the key here is to have an emergency fund available quickly should you need it unexpectedly. The key here is the name: emergency fund. If you’re unsure if taking money out of the fund is considered an emergency just ask yourself “would my Chestnut Planner consider this an emergency?” Chances are, that will be the end of the
conversation. There is a reason why the saying “saving for
a rainy day” has lasted a long time

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