Jan
29
The government shut down took a toll on furloughed employees and government contractors, reminding us of the need for financial emergency preparedness. A 2015 study from Pew Charitable Trusts found participants’ emergency funds underfunded in spite of income levels. Causes of financial shock include income loss (hours and wages cut, jobs lost) and unexpected expenses (car repairs, house repairs, uninsured illnesses and treatments) and are followed by long financial recovery periods. The Pew found that lower-income families took three times longer to recover than higher-income families. There is also an emotional toll to pay. In the case of job loss, the higher the income and/or age, the longer it takes to get a new position. Personal examples of financial shocks are cited. The author recommends that business owners save 6 – 12 months after-tax income (depending on the size of the business) with an additional 3 – 6 months of business expenses put aside. She recommends that rank and file workers 45 and older save 6 months of after-tax income, with younger workers putting aside at least 3 months. Taking care of yourself is a lesson here and also knowing that people who prepare for financial emergencies tend to be better savers for retirement and are better at accumulating financial assets.
Chia-Li Chien
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