Your May Financial To-Do List

How best to stash your cash for a rainy day

Ruth Saldanha 10 May, 2021 | 4:28AM
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Ruth Saldanha: Welcome to Morningstar. I'm Ruth Saldana. Each month we discuss specific financial areas on which you should focus, and this is your May financial to-do list.

We finished with our taxes and many of us are expecting refunds and are wondering where to put our unexpected loot. Well, this is actually a really good time to start thinking about your emergency fund, a stash of cash that you can use in case of an emergency. Morningstar's Christine Benz says that three to six months' worth of expenses is a good starting point in terms of the size of the fund, but this would very. Lower income earners might find it harder to set that much aside, while higher income earners think that their income is the buffer.

In both cases, remember you need to plan for a circumstance in which that income just doesn't exist. Lower income earners should start a fund and save whatever they can, while higher income earners should set their targets higher since these jobs are often in more specialized career paths that could take longer to replace. If you are the sole earner in your family, that also argues for having an even bigger cushion because you don't have another person's income to fall back on where you to lose your job.

Finally, think about a broader contingency plan in case this happens. How can you pare down your budget? Do you need additional health or other coverage? Benz also recommends that you think about other skills you could hone to generate some replacement income while you look for another full-time job.

So, that's something you could do with your refund. Until next month, good luck.

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About Author

Ruth Saldanha

Ruth Saldanha  is Senior Editor at Morningstar.ca. Follow her on Twitter @KarishmaRuth.

 
 
 

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