Contingency Planning: It is the responsibility of investment advisors to prepare their clients for a variety of eventualities.
These dangers must be considered in the family’s financial plan. To prepare for the following possible outcomes, think about the following scenarios:
- I’m going to use XYZ Both parents’ salaries are crucial to the family’s well-being. The family would be in serious financial trouble if something happened to one of the family’s two wage earners. This risk can be mitigated by life insurance.
- Healthcare costs are another financial risk for any family.
- People who lose their jobs will see a reduction in their income. Having a second income protects you from the possibility of losing your first one. If one of them loses their job, the other one will hopefully keep it. This would guarantee a certain amount of revenue each month.
- As a safeguard against the likelihood of income loss or reduction, a family’s initial saving aim should be an emergency fund. In the event of a loss of regular income, the fund should cover expenses for six months. As previously said, the emergency fund should be kept in liquid assets to make it easy to access if needed. If income security is high, the fund can also be held in a laddered fashion, with liquid assets holding the equivalent of about three months’ expenses and less liquid assets but better returns holding the rest of the money. The emergency fund’s size should also be reevaluated on a regular basis. It’s a good idea to do it once a year or whenever your monthly expenses go up significantly, such when you get an EMI.
When a family has two incomes, the holding pattern tends to be more tightly tied to the investment’s source of revenue. Investments derived from the earnings of one partner can be kept by that partner as the first holder.