Category - Budgeting

1
How Should You Invest Your Emergency Fund?
2
Making the Best of a Bad Situation
3
How Much Do You Need in Your Emergency Fund?
4
How Can I Tell If My Money Market Fund Is Safe?
5
What Happens To Your Insurance Policy When the Insurer Fails?

How Should You Invest Your Emergency Fund?

Having discussed why having an emergency fund is a good idea and how big an emergency fund needs to be, I’d now like to talk about investments suitable for an emergency fund.

Generally speaking, some part of your emergency fund needs to be in a liquid, readily accessible investment whose value does not fluctuate much.  An emergency fund invested entirely in your employer’s stock would therefore be a really, really poor choice.  Typically, emergency funds are invested in savings accounts, CDs, money market accounts (taxable or tax-free), or Treasury bills/notes/bonds.  Where bank deposits are used, they should be FDIC-insured.  …

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Making the Best of a Bad Situation

Congress voted down the Troubled Assets Relief Program (“TARP”) legislation, much to the chagrin of the financial markets. At the moment, the markets continue to be in distress, despite a “dead cat bounce” in stocks today. What should you be doing in terms of your household finances?

If you’ve already established a diversified investment portfolio that fits your goals, your situation, and your tolerance for risk, sit tight.  This is not the time for making big moves into or out of your investments.  The stock market is likely to swing wildly for a while until there is confidence that the …

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How Much Do You Need in Your Emergency Fund?

In my first post on emergency funds, I discussed why having an emergency fund is a wise idea. The next question is, how big does an emergency fund need to be?

The question of how much should be set aside for emergencies is one of several that people tend to avoid.  It can be avoided either by not saving anything, or by saving much more than is needed.  I’ve seen clients do both, although the former is the more common error.  Most people want to think about an emergency fund about as much as they want to think about …

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How Can I Tell If My Money Market Fund Is Safe?

How can you tell if your money market accounts are safe?This Monday, something very unusual happened: a money market fund began trading its shares at 97 cents, instead of a dollar. Reserve Primary Money Fund (RPFXX) was forced to write down three quarters of a billion dollars of Lehman Brothers debt as a consequence of the Lehman bankruptcy. Even though the debt may eventually be partially paid through the bankruptcy process, as a current obligation the debt has no value. Thus the fund’s share value had to drop, forcing the fund to “break the buck.” On Monday and Tuesday, investors in the fund pulled out $27 billion in response. FT

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What Happens To Your Insurance Policy When the Insurer Fails?

American International Group, one of the largest insurance companies in the world, has been struggling to stay afloat this week. Moody’s Investors Service and Standard & Poor’s lowered their ratings on AIG; these downgrades, in turn, trigger clauses in AIG’s contracts with its trading partners that could require the company to raise billions for collateral or penalty payments. It looks as though the federal government has decided to keep AIG from going under. Still, today insurance policyholders may have been wondering: what happens to my insurance policy if the insurer goes bankrupt?

The financial health of an insurer …

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