Getting Ahead
So let's assume for a moment that your cash flow is being well managed and that any unsecured (credit card) or unsubsidized government loans are either paid off or are in the process of being both liquidated and retired on an accelerated, predictable schedule. Then what?
EMERGENCY FUND
(Funds Set Aside for the Funding of Unexpected, Urgent Expenditures from 0-6 months Out)
This topic was also addressed on the Credit and Debt Management page. Let's assume that you're just getting around to accumulate the "rainy day fund." Do what you can! Begin accumulation of three to six month's living expenses in a secure, stable position. This pursuit, like anything else of value, will not happen overnight but with planning and discipline the objective you establish can and will be reached. Understand that there are several alternative options to consider when deciding where and how to accumulate the emergency fund. Those alternatives can be covered with you in the Center if you'll stop by.
SHORT & MID-TERM ACCUMULATION
(Reaching Objectives Between 6 months and 5 years Out)
Although it may make sense to think about goals like graduate school or the purchase of a home somewhat synonymously with one combined "emergency/opportunity fund" established, you'd be well advised to avoid the temptation for at least two reasons.
- The conceptual separation of the two (i.e. labeling one an "emergency fund" and the second an "future opportunity fund") can and will likely make all the difference in relationship to the attitude you develop about these funds and will increase the chances that you will leave them alone for specific reasons and purposes rather than spending the funds impulsively on today's next questionable purchase.
- In addition, goals like graduate school or a down payment on a home, may dictate using different financial tools during the period of saving and conservation. For example, by definition, an emergency fund must be liquid and immediately accessible due to the nature of dealing with the completely unexpected. On the other hand, a graduate degree or a home purchase might not be in the plan within six months but could be thereafter. If this is the case, perhaps positions less liquid but with retained relative stability might make sense with their added advantages until the funds are needed.
***Consult with us to determine which alternatives may make sense according to your circumstances. DISCLAIMERS
LONG-TERM ACCUMULATION
(Reaching Financial Objectives 5-Years Out and Beyond)
Some would suggest that the time-frame between 5 and 10-years out should technically be labeled mid-term vs. a long-term time horizon. Conventional thinking makes sense of such a claim but in the context of historical market cycles and beyond, anything 5-years and beyond can reasonably be classified as longer-term. That said, does the prospect of retirement at a fairly young age with the ability to maintain an adequate income to maintain lifestyle in an atmosphere of ever increasing costs sound good? Simply stated, the longer you procrastinate your accumulation for long-term goals the more money it will require out of your pocket to obtain them. Play: WHO WANTS TO BE A MILLIONAIRE!!! You'll quickly see that you can't afford to wait to get started, beyond of course, reasonable delays given your limited resources as a student!!
***Consulting with us to determine which alternatives may make sense according to your your circumstances. DISCLAIMERS
