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Do you have a job-loss safety net?

Posted October 15, 2014 in Advice Column, Grimes

What are the chances that I’ll lose my job?

Unless you’re a retiree, a tenured college professor or the owner of a business, that question has probably passed through your mind at least a few times. Even if you’re confident about the security of your current position, it never hurts to put in place a good safety net. Some of the primary steps are outlined below.

• Build up your emergency fund. Having an emergency fund in place can help if you suddenly find yourself unemployed. Moreover, an emergency fund can also be helpful for unexpected and unreimbursed medical expenses, big-ticket auto and home repairs, etc. Conventional financial-planning wisdom has long held that you should keep three to six months’ worth of living expenses in highly liquid accounts like checking or savings accounts, certificates of deposit (CDs), money market accounts or money-market mutual funds, but the recent financial crisis illustrates that figure is probably too low. Wouldn’t you like to have more than three months to find a new job if you lost yours?

• Consider a Roth IRA for retirement savings. You can’t put your life — and your long-term financial goals — on hold just because you’re worried about job loss. But you can be strategic about what you sink your money into, and that means focusing on those investments with the fewest strings attached in case you need to make a withdrawal. Rather than saving within the confines of your company retirement plan or a traditional IRA, where you’ll pay taxes and penalties if you need to withdraw your assets prematurely, consider deploying fresh retirement dollars into a Roth IRA instead. And because you’re contributing after-tax dollars, you won’t have to pay taxes on your earnings from year to year or upon withdrawal during retirement. Please keep in mind that income limits do apply.

• Pay down costly forms of debt. If you already have expensive types of debt such as credit cards and are concerned about job security, the first thing to do is to reduce that burden as soon as you possibly can. Credit card companies are the last folks you want to mess around with if you find yourself in a financial bind, as they’re able to raise your rates if you’re late on a payment.

• Take advantage of the perks you have. Have you had a physical lately? Do you need new glasses or contacts? Are you overdue for a visit to the dentist? If so, it’s time to make some appointments. Chances are you’re paying decent-sized premiums for the insurance you have through your employer, so it pays to take advantage of all your perks while you still have them.

We can help you determine an appropriate amount of risk, as well as monitor your investments with a proven, unbiased process.  Please come see me at City State Bank or call me at (515) 986-2265 to set up a meeting.

Information provided by Wade Lawrence, City State Bank, 100 N.E. Jacob St., Grimes, 986-2265.

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