Answers to Your Money Questions

Here are a few questions that I've received from my email bag. Do you have questions you'd like answered? Send them to info@connercoaching.com!

1. Are U.S. Savings Bonds still a good way to save money for the future?

I would suggest mutual funds as a better investment. Savings bonds are thought to be safer, but in actuality the variable rate they have can fluctuate quite a bit causing a great deal in losses.

2. How much money is considered an Emergency Fund?

Your initial emergency fund is $1,000. Once you have saved this amount, you stop adding to this account and begin to get out of debt. Pay off everything except your mortgage. Once you are out of debt, you go back to your emergency fund and add 3 – 6 mos. expenses, not income. This gives you a cushion in case of job loss, illness, or other unforeseen event.

Sidebar -- I’m hearing a lot of advisors say in this economy you need 9 – 12 months of expenses saved. While I don’t argue with this fact, I suggest 3 – 6 mos as a starting point.

3. What is the most effective way to handle cash?

When you receive cash, you should allocate it for a purpose. If there’s no bill to pay – add it to your emergency savings or other savings goal. If you have your $1,000 emergency fund and there is outstanding debt, additional cash should be put toward paying debt down from the smallest to largest amount.

4. When I reach one financial goal, how do I plan for bigger goals?

You would simply budget for your bigger goals. For example: If you want to start a business or currently have a business in addition to your ‘day job’- write out how much it will cost you start/run the business. Begin to set aside money each pay toward it. It would be the same for any financial goal, (retirement, vacation, mission trip, etc.). First calculate how it fits in your budget and designate a dollar amount each pay for it.

5.  My car is paid off, should I now remove the full coverage policy for a no-fault policy which is cheaper?   This would give me extra money to pay down debt.

If you have enough money saved to replace the car (for cash) without tapping into your emergency fund, you can remove the full coverage. Otherwise, it is better to be safe than sorry - keep your full coverage policy!


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