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How much liquidity do you really need?

The purpose of establishing an emergency fund is to give you access to liquidity when you need it without compromising the long-term growth of your other investments. This is money that you can easily get your hands on if something comes up. You might need money for a major home repair, problems with your car or any other unexpected emergency situation.

Liquidity is the most essential component of an emergency fund. You want to be able to access this money quickly and without penalties. Not being in the stock market is also important because you don’t want to have to sell an investment at a loss just because you haven’t planned properly.

How much do you need to have in your emergency fund? The amount of an emergency fund will vary depending on your age, health factors, and existing debt. A 68-year-old woman who is fighting cancer will probably want to have access to a rather large emergency fund in order to pay her ongoing doctor bills. A 72-year-old couple with no debt and an asset-based long-term care solution might only need three months of expenses in their emergency fund.

If you’re concerned about finding the funds to set aside for your liquidity needs, keep in mind that your financial professional will be looking for opportunities to build a fund for you if you don’t already have one. It often happens that in the process of “planning first,” issues come up that can be addressed more strategically. Do you own any life insurance policies that are no longer needed? Is it possible to redirect those funds to build your emergency cushion or add to the growth of your Leave On Money? As time goes on and new situations arise, people often need guidance when managing their liquidity. For example, if you need a new car, is it better to pay cash for it, or to finance a vehicle at six percent? Every situation is different, which is why having an investment advisor in your corner can help you stay on track to achieve your goals.

How much Liquidity do you need? Think about it. If you haven’t sat down and created an income plan for your retirement, your perceived need for Liquidity is a guess. You don’t know how much cash you’ll need to fill the income gap if you don’t know the amount of your Social Security benefit or the total of your other income options. If you have determined your income need and made a plan for filling your income gap, you can partition your assets based on when you will need them. With an income plan in place, you can use new rules to enjoy both Safety and Return from your assets.

Do you want to discuss Liquidity with a financial professional? Fill out the form below or call (317) 903-9157 to schedule a no-cost, no-obligation visit with the retirement experts at ReJoyce Financial.

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