In part 1 and Part 2 of my blog on “Own Your Financial Future,” I discussed why it is important for women to take control of their financial future and how to do it. This blog continues the discussion on the importance of “Emergency Funds” and “Income Protection” in your financial plan.

Have an Emergency Fund

Have 3-6 months of income needs set aside, out of sight but available within a week, to be used only (I repeat, only) in the event that you cannot earn an income. Temporary shortfalls are not emergencies. If you are regularly having temporary shortfalls, increase the minimum you keep in your chequing and consider it your ‘zero’ baseline.

A line of credit is not an emergency fund. It may be a way to cover a temporary shortfall, but should be paid off monthly and not allowed to accumulate. If it is accumulating, you need to reduce your living expenses.

Protect Your Income

I had a friend get a serious head injury from the hatch of a mini-van. Unfortunately, this head injury prevented her from working for several years due to a serious concussion. Things like this happen. Every day. An emergency fund can cover you for the 30-120 days before an employer disability policy kicks in (if you have one), as well as top up your needs beyond business-as-usual expenses (think domestic help, physio, and medical care). Please do not assume your workplace disability policy is adequate just because their benefit plan is generally good. Get an insurance advisor to read through your employee handbook and provide an evaluation of benefits. Ditto for life and critical illness insurance.

Asset Accumulation

I need to write an entire blog about this one, but suffice to say that your greatest ally (or enemy) is time. A dollar saved today is much more important than a dollar saved in a few years. The biggest mistake people make here is to think “I’ll save when I have more.” Get into the habit of saving 15-40% of what you earn, depending on how late you are starting.

In future blogs, we’ll take a closer look at #5 and #6, with tips for asset accumulation and the financial aspects of estate planning.