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In order to spend money how you so desire, you have to first make sure all your liabilities are covered. You have to make sure your monthly bills and debts are paid. In this video, we found it most helpful because Ellen, a personal financial journalist, broke down the steps you need follow in order to have a successful financial plan. She talks about calculating your net worth to be able to calculate how much you ca spend and how much you need to save in order to have secure finances in your future. We liked that this video discusses more than just preparing the youth for retirement. Ellen talks about achieving our personal future goals as well. Being able to properly budget our expenses is one of the most important skills that we can have right now in order to have a wealthy savings and the ability to avoid financial crisis'.

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Transcript

Narrator: Do You Have a Financial Plan?

Financial planning is thinking about how to achieve your short-term and long-term goals. Let's talk about financial planning.

Unlike a budget that deals with cash flow, a financial plan looks at the big picture. It helps you set short-term and long-term financial goals and identify steps to achieving them. It's never too early to start planning for your future.

To help you on your path, we'll take a look at what a financial plan is, the difference between a financial plan and a budget, reasons why you should have a financial plan, and finally, the information you need to prepare your financial plan.

We will finish with an exercise to show you how to calculate your net worth. Your net worth is defined as your assets - that is, what you own - minus your liabilities - that is what you owe.
What is a FINANCIAL PLAN?*
Narrator: A financial plan is a roadmap to help you manage your finances over the long term so that you can reach your life goals.

Financial planning is not just about saving for retirement, although that is one good reason to have a financial plan. When working on your financial plan, you should ask yourself:

Where am I today? Where do I want to be? How do I get there?

Whether your goal is to get out of debt, buy a condo, take a year off work, or save for your retirement, your plan should always answer these questions.

Many of you may already have a budget. For those who don't, I encourage you to create a budget to help you manage your spending. It will also help you with your financial plan. A financial plan goes beyond a budget. It sets goals for your life and ways to work toward them. While a budget compares current income with expenses, a financial plan helps you think about future earnings, and what steps you need to take to reach your financial goals.

In short, a full financial plan includes the resources you have available, your debts, your earning potential, insurance, legal commitments, income taxes, pensions, and other factors.

Email conversation (on screen):

From: Mom & Dad

To: Sarah

Subject: Checking in

Hi Sarah! It's mom & dad from Florida! The weather is great and we're enjoying ourselves. How's the budgeting going? We miss you! Love Mom xox

From: Sarah

To: Mom & Dad

Subject: RE: Checking in

Hi Mom! Now that I've figured out how to do a budget, I'm preparing for my financial future! It's exciting! I'm glad you and Dad are enjoying retirement! Send some warm weather North. See you soon, Sarah
How can a Financial Plan HELP YOU?*
Narrator: You may be asking yourself how a financial plan can help you. Among other things, it can balance today's needs with your future goals, make the best use of your financial resources, manage your taxes and insurance, stay motivated and save for your needs, write a will, and plan for short-term and long-term goals. Remember that a financial plan is a living document, meaning it should be kept up to date. Once you create your plan, review it frequently. Your life or financial situation may change, which can have an impact on your goals and your overall financial plan.
Information needed to prepare a FINANCIAL PLAN*
Narrator: Preparing a financial plan is a matter of answering a series of questions. Some questions will require more effort to answer than others. Keep in mind that a well-thought-out financial plan will help you achieve what is important to you. The Financial Consumer Agency of Canada has created a simple template to help you prepare your financial plan.

It's available at their website.
ItPaysToKnow.gc.ca
For more complex financial plans, use the services of a certified financial planner. The simple financial plan template asks you several questions, such as: What do I want to do? What am I starting out with? Will I have enough money to get where I want to go?

Each question requires you to enter personal and financial information. Once completed, the template will help you calculate your net worth, identify your monthly income and expenses, and determine what is needed to reach your goals. If you don't have all the information you need when you create your financial plan, enter your best guess. Update your plan when you have more accurate information.

Email conversation (on screen):

From: Mom & Dad

To: Sarah

Subject: RE: Re: Checking in

Good for you Sarah! Your father and I are so proud of you. Set your goals high and reach for the stars, you can achieve anything you set your mind to! We miss you, Mom & Dad

From: Sarah

To: Mom & Dad

Subject: RE: Re: Re: Checking in

Thanks Mom! Preparing my financial plan is taking some work but I know it will pay off. It sure helped to set financial goals while I was in school. I am figuring out my net worth right now. Let's see if all those summer jobs paid off! I want to live the good life like you and Dad! Love Sarah
Calculating your NET WORTH*
Narrator: An important step in your financial plan is calculating your net worth. It helps you answer the question: What am I starting out with? As with your financial plan, you should update your net worth on a regular basis. There are three steps to calculate your net worth.

Step 1: List all your assets and their monetary value. This includes savings, investments, real estate, motor vehicles, and any other possessions that have a monetary value, such as art and collectibles. Add up the total value of your assets at current market prices.

Step 2: List all your debts and their values. Examples include credit card balances that you can't repay within a month, loans such as car loans, student loans, and balances on a line of credit, any mortgage balances, and any other debt, such as income taxes you haven't paid or money owed to family. Add up the total value of your debts.

Step 3: Calculate your net worth by subtracting your total debts from your total assets. I hope it is a positive number. If not, you have a negative net worth. This means your debts are more than your assets, and you should try to repay them as fast as you can.

Email conversation (on screen):

From: Sarah

To: Mom & Dad

Subject: I did it!

Mom! I did it! I finished my financial plan! I know exactly how much I need to make and save to reach my goals! It's exciting!! Maybe I'll come visit you and Dad in Florida! Miss you, Sarah

From: Mom & Dad

To: Sarah

Subject: RE: I did it!

Stay the course Sarah, and keep updating your plan! the sun is shining and we'd love to see you. Mom & Dad xox
What did we LEARN?*
Narrator: To summarize, we covered the basics of financial planning, including what is a financial plan and why it's important to have one.

We also discussed what information you need to create your financial plan, and how to calculate your net worth. It isn't always easy, but stay focused. You will feel rewarded every time you reach one of your life goals.

I wish you financial success.

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educational materials; personal finance; lifestyle; money management; financial planning

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Learn what a financial plan is, the reasons to have one and how to make your own.

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Being able to monitor your money on a daily basis or even a monthly basis is key to planning for your future and contributing to your savings. If you watch where your money goes, you will be able to maintain a steady cash flow and recognize issues before they worsen. This will allow you to see where your money goes and what requires majority of your income. By organizing and watching these expenses, you will be able to figure out how much money you have left over and how much you will need to put aside for your safety net.

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Article #1- 5 Simple and Smart Investment Tips for Teens and College Students

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Article #1- 5 Simple and Smart Investment Tips for Teens and College Students

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This article discusses ways in which a student can invest their money. This is relevant to a financial safety net because in order for us to become financially sound in the future, we have to accumulate money gradually over the years- investing is one way of doing so. This video has step-by-step suggestions on how to begin investing. They talk about understanding the value of money before spending it, and understanding how stock markets work before putting your hard-earned money into them. A good point they made in this video was to pay off your student debts first. In order to create a financial safety net, you want to make sure you do not owe money before you start saving money. This will prevent your savings from depreciating when the interest on those debts increases and you're forced to use your safety net to pay it off.

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Money is one of the resources which we have to manage to the best of our ability. One of the activities we can conduct to manage it is investment. This is where we use our money to buy an asset whose value we expect to increase over time. Hence, it can deliver a profit after sale. Investment is the process of increasing wealth by multiplying your money through the growth of an asset. In some cases, the asset is purchased so as to provide a future source of income instead of being sold. Some popular assets which we can buy today include stocks, bonds, mutual funds, Exchange Traded Funds (ETFs), annuities and certificates of deposit. Investing is necessary and an effective way of improving your personal wealth. With the Internet providing us with information about various trading markets around the world, literally anyone can invest their money regardless of age. Here are smart investment tips for teens and college students.

Increase your knowledge on investing

The best decision that a teen or college student can make is an investment in knowledge. You should always begin by reading about investment. There are books, journals, reports and news about this topic all around us. There are also blogs and websites on the Internet which are dedicated to investing. By reading through these sources of information, you can learn about various markets around the world such as the New York Stock Exchange and the Tokyo Stock Exchange. Reading also helps you to learn how to analyze assets before you invest in them. Examples of these are bonds, stocks and mutual funds. You also learn how to create an effective investment strategy. Even the most successful investors such as George Soros and Warren Buffet were not born experts in their fields. They had to learn the basics and then proceed to create strategies that helped them build fortunes. As such, teens and college students should begin by learning all they can about investment.
Suggested Reading : 8 Common Mistakes That Every New Investor Needs to Avoid
Understand the value of money by working for it

It is important for a teen or a college student to understand the value of money. The best way to do this is by working to earn it. There are many establishments which offer part time or full time jobs. You can begin by taking up some of these jobs so as to learn the value of money.This experience can help you to learn that a pair of nice sneakers with a price tag of $199 is actually worth 25 hours of work at a job that pays $8 per hour. This perspective will help you invest wisely because you know the struggle behind all your dollars.
Suggested Reading : 10 Money Mistakes That Will Keep You Broke if You Don't Know Them
Track some stocks on your own for enjoyment and learning

This is a tip that can help teens wet their feet in the world of investment. It is highly important to pick and follow some stocks of the companies which sell products that you know. Teens can pick some companies which are popular, have products that they buy and exhibit healthy growth potential. Examples of these are Disney (NYSE: DIS), Coca Cola (NYSE: KO) and McDonald's (NYSE: MCD). Simply identify their stock symbols and follow their performance over time. Try to make sense of their performance in relation to the news, financial reports and economic conditions. By doing this, you learn how to analyze a stock and learn about the factors which affect its performance. This is a great way to learn about the stock market and how to trade in a fun, relatable way.
Suggested Reading : 18 Trends and Stocks To Watch for Big Profits in 2017
Pay your college debt first

Majority of the college students around the world graduate with substantial student debt. College education is expensive and often racks up debt that runs into the thousand of dollars. Therefore, for a college student who is interested in investing, it is wiser to pay off your debt first than risking your money in the financial markets. This is because paying off debt has a guaranteed return while the markets are not that predictable. For example, paying off $10,000 worth of student debt in full which has an interest rate of 15% is the same as making 15% returns on the debt amount. This is a return of $1,500 because you never have to pay any future interest on that particular debt any more. If you direct that amount of money in the markets, it is very hard to get a 15% return on your investment. Thus, if you are a college student interested in investing, begin by paying your student debt.
Suggested Reading : 20 Secrets That You Need to Know About Money and Economics
Open up a trading account with a stock brokerage

After learning the value of money, how the world of investment works and have collected some capital, you may feel ready to invest in some real stocks. At this point, the first thing which you need to do is open a trading account with a stock brokerage. There are two main options available. You can open an account with an online discount brokerage or go to a traditional brick and mortar brokerage. The online discount brokerage allows you to make trades through a computerized system of trading. On the other hand, a traditional brokerage gives you professional investment advice on a one on one basis as well as extra services. As a new investor, a teen or college student should seek to open an account with a discount brokerage. This is because there is a lower initial capital investment. Moreover, you are only charged for any sales or purchases that you make. Seeing as everything today is moving to the Internet, an online investment brokerage account is far more convenient than the traditional brokerages. By giving you the freedom to make trades from your computer or through your smartphone, it is an ideal way to begin trading for teens and college students.

The Important Take Away

Spending your money to buy assets gives you the best interest over time. It is a tried and true way to create and maintain wealth. Today, teens and college students can take part in this activity. The tips above can help them to learn and eventually invest their money in the markets. Read and understand them so as to create a strong financial foundation and a promising financial future.

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5 Simple and Smart Investment Tips for Teens and College Students

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Money is one of the resources which we have to manage to the best of our ability. One of the activities we can conduct to manage it is investment. This is where we use our money to buy an asset whose value we expect to increase over time.

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It is important to have a clear understanding of what a financial safety net is and how to achieve one. This video explains exactly how to get one started and the importance of having one.
In the video, it says "you can't start saving for your retirement until you figure out your finances for the next month. That's where our financial safety nets comes in." This is true because if you do not track how much you are spending every month, you will not be able to have a secure and stable savings that you will be able to rely on for retirement. In the video, it mentions that in the event of an emergency, your financial safety net will be there to assist you in those times of disparity. It is important to replenish the money you withdrew from the safety net because if you don't, you will not have sufficient savings for when you need it again. Being prepared early is the key to being stable in the future, and this is the most useful advice you can receive at a young age.

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Sitting down and planning all your current and future expenses (liabilities and assets)will help you better understand how big of a safety net you can create and how much you will require to save to accommodate these future needs and desires. This picture accurately displays the organization and layout of how you should get started on your future. I find it extremely important to have a plan and to start by getting yourself organized

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Planning for your future is one of the only ways to assure you are going to encourage the success of it. Rona, a certified financial planner, introduces this video by saying that people don't plan their finances. She says that they say that they wish they saved more but they had to replaces the car or use their money for surprise expenses like a leaky roof. This is what we found most interesting about this video because if we do not have that financial safety net that we had set in place in preparation for unexpected future expenses, then we will not have a sufficient saving, resulting is use going paycheque to paycheque. Planning is the key aspect in a financial safety net. Always expect the unexpected and prepare for it; this is where the safety net comes in.

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Would $1,000 in the bank cover all your bills for the next six months? Probably not. And yet, about a quarter of Canadian homeowners confess to only having $1,000, or less, set aside for an emergency.

These are the findings of the latest survey by Manulife Bank of Canada. Turns out, more than a third of mortgage holders in Canada would have difficulty making their regular mortgage payment within three months if the main income earner in their household lost their job. Yet, experts, including Manulife Bank, recommend that each household keeps enough in emergency savings to cover three to six months of expenses.

"A high-interest savings account is a good option. Or, if you've got a home equity line of credit, you could use your savings to reduce your debt and save interest - and still have access to that money if an emergency arises," said Rick Lunny, president and CEO of Manulife Bank of Canada.

The concern is that Canadians are living beyond their means-a situation that's grown over the last decade along with surging real estate prices. According to the Manulife survey, 40% of homeowners have difficulty managing common expenses associated with home ownership, let alone creating a financial buffer (commonly referred to as a "rainy-day fund" or "emergency savings").

It appears that up until very recently, Canadians were heeding the advice of experts and cashing in their emergency funds. The idea was that if you lived in a financially stable household, it actually made more sense to use that cash elsewhere and open up a line of credit that you could use if there was a crisis. The theory was that the cash sitting in an emergency fund-typically in a high-interest savings account or a money-market fund-was earning less than what your debt cost you. Rather than keep the emergency fund, many Canadians used it to pay down their debt.

But with recent headlines of mortgage rate hikes and a potential increase in U.S. interest rates (which would prompt an increase in Canadian interest rates), the idea of having an emergency stash of cash is back in favour, particularly if you, like one in six Manulife survey respondents, who would encounter financial difficulty with any increase to their mortgage payment.

Get advice, stress-test your finances

"A financial buffer is an important part of a financial plan," said Lunny. "If you don't have extra cash at the end of the month, it's very difficult to build a rainy-day account. For those who find themselves in this situation a good place to start is working with an advisor to create a budget. Many people are surprised at how much of their money is going toward things that they don't consider that important."

According to a new study sponsored by Mackenzie Investments, 72% of Canadians didn't have a written financial plan.

In the same survey, more than two-thirds said that the solution to feeling more secure in the future was to either discover new or additional ways to generate income or to find a better paying job. In other words: more money, less problems.

But professional money coaches know this isn't actually the solution to debt problems. As Sheila Walkington, co-founder of Money Coaches Canada, has told us in the past, a key component of her job is to "help clients deal with the psychology of money. To help them shed their negative attitudes and bad habits and to motivate them to get a grip and stop self-sabotaging their financial goals." Yet, in the recent Mackenzie survey, only 11% acknowledged that developing a financial plan would help and 6% believed that advice from a professional would help.

In the past, MoneySense has advocated strongly for the development of a financial plan. As award-winning journalist, Julie Cazzin, : "[a] personal finance plan is [a] road map, helping [you] navigate to [your] dreams. And the roads to those dreams were built on details."

To establish your own financial plan, check out the 11 Steps to Financial Freedom , which includes worksheets and tips on how to create the right financial plan for you.

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It's time to master your debt, with sound financial planning

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Would $1,000 in the bank cover all your bills for the next six months? Probably not. And yet, about a quarter of Canadian homeowners confess to only having $1,000, or less, set aside for an emergency. These are the findings of the latest survey by Manulife Bank of Canada.

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Article #3 - Nearly half of Canadians would face financial crunch if pay cheque delayed by even a week, survey shows 

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Article #3 - Nearly half of Canadians would face financial crunch if pay cheque delayed by even a week, survey shows 

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To shortly summarize this article, it states that Canadians even though they are trying to save, the higher cost of living expenses interrupt their ability to make a sustainable income, which makes them live from pay cheques to paycheque.

The introductory paragraph in this article states that most Canadians would have trouble meeting day-to-day financial responsibilities if there pay cheques were delayed a week. This directly correlates to the importance of a safety net, as a safety net by definition is long term financial goals that you accumulate to help increase of any type of tragedy that may cause a sudden need in money. We chose this article because it directly relates to not only our generation and the struggles we will go through but how we are affected by the safety net as well. One interesting topic we found within the article was the average annual income per household at $125,000 per household. Mitch’s father is an accountant and he said janitors at Hydro One make $120,000 a year. What if this individual was married, they would be well above the average and give them the opportunity to create a strong safety net.

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Almost half (47 per cent) of Canadian employees say they'd be hard-pressed to meet their financial obligations if their paycheques were delayed by even a week, says a survey being released Wednesday.

The situation is slightly more dire in Ontario, where 49 per cent live paycheque to paycheque, says the ninth annual survey from the Canadian Payroll Association (CPA). Not surprisingly, these workers without a financial safety net say they spend all or more than their net pay, with the most common excuse for increased spending being "higher living costs." If they save at all, the amount is well below the 10 per cent minimum savings level (of net after-tax pay) recommended by the CPA; 42 per cent of the survey respondents nationally said they save 5 per cent or less.

The lack of an emergency cushion is also apparent: 22 per cent nationally say they could not come up with $2,000 within a month to meet an unexpected emergency expense like a car repair. Little wonder that 35 per cent feel overwhelmed by their debt levels. Twelve per cent believe they'll never be debt free while across Canada 42 per cent now believe it will take at least 10 years to pay down their debt (a figure that's higher than the 36 per cent cited in the survey a year ago.)

The high cost of Canadian housing is also showing up in the survey. In previous years, credit-card debt was cited as the single hardest debt to pay off but the 2017 edition finds for the first time that home mortgages are the hardest to pay off: 32 per cent citing them versus just 23 per cent who cited credit cards.

Almost half (46 per cent) expect they'll have to delay the timing of their retirement, compared to what they had hoped five years ago, with the main reason being "not saving enough." Nationally, 74 per cent have saved just a quarter of what they feel they need to retire, and 47 per cent haven't saved even that much. On average, half of working Canadians believe they'll need a retirement nest egg of at least $1 million. The CPA says the average target retirement age is 61 nationally, and 62 in Ontario.

The survey numbers are worse for Millennials and Generation X: More than half of them would be in a jam missing a single paycheque (55 per cent for Millennials in their 30s; 51 per cent for GenXers in their 40s). And lest the reader conclude these patterns are based on low incomes, the CPA says there was actually a 5 per cent increase in the number of employees with total household incomes above $125,000 per year.

Ironically, the way out of this savings conundrum is to make an effort to save paycheque by paycheque: a strategy the CPA and other financial experts generally term "Pay Yourself First." That means using your financial institution's pre-authorized chequing arrangements (PACs) to automatically divert 10 per cent of net pay into savings the moment a paycheque hits your bank account. Just like income taxes taken off "at source," the idea is that you won't miss what you don't actually receive.

Of course, consistent saving requires living within your means: spending less than you earn and banking the difference. For young people in particular, I'd suggest they start a PAC directed to tax-free savings accounts, which in time will automatically create a necessary cushion of emergency savings.
Jonathan Chevreau is founder of the Financial Independence Hub and co-author of Victory Lap Retirement. He can be reached at jonathan@findependencehub.com

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Nearly half of Canadians would face financial crunch if paycheque delayed by even a week, survey shows

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Almost half (47 per cent) of Canadian employees say they'd be hard-pressed to meet their financial obligations if their paycheques were delayed by even a week, says a survey being released Wednesday. The situation is slightly more dire in Ontario, where 49 per cent live paycheque to paycheque, says the ninth annual survey from the Canadian Payroll Association (CPA).

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Monitoring and budgeting where your money goes plays a huge role the taking into consideration how much savings you can and will have in regards to your financial safety net. If you are spending your money on car or household accessories that are not of dire need, you cash flow will become jeopardized and you will lose money that you could be putting towards your future. This picture accuracy displays a man calculating to see if he has enough money to buy a new sports car or to install a pool. By putting thought into your expenses and purchase, you can better manage and monitor your money. If you don't have the money now, you won't have it later so its better to see if you can afford it before you purchase it.

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Article #2- How to Build Safety Nets for Your Personal Finances

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Article #2- How to Build Safety Nets for Your Personal Finances

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It is important to know ways that will help you develop an adequate savings for your future and in the event of emergencies. Having a well developed safety net is a method that will prevent the headaches and sleepless nights when your finances become jeopardized.
This article says that in order to avoid financial crisis, having a financial safety net in place will keep you safe. They suggest 4 tips to achieving a safety net. These tips include paying off your debts first, setting aside a small amount of money each month to build the financial reserve, making sure you have adequate insurance to cover any disabilities that may arise later on that you may not be able to afford or that may chip into your safety net, and lastly, opening up a RRSP so you can cut taxes and capitalize on your invested money.

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Have you ever felt stressed out about money? Most people know what it's like to get caught short without enough cash in the bank or to lose sleep over mounting debt. The key to overcoming any financial crisis is to have the right safety nets in place to keep you safe-and help you sleep at night. I'll show you 4 simple ways to take control of your finances so you'll be protected no matter what happens.

What is a Financial Safety Net?

Just like a smart acrobat would never cross a high wire without a balancing stick and a big, strong net stretched out below, you should never go without financial safety nets. The types of safety nets you need depend on your personal and family situation. But they typically provide the answer to various "what if" questions like:

what if I lose my job?

what if I have a big unexpected expense?

what if I get really sick and can't work?

what if my spouse dies?

what if I get sued?

I know thinking about those situations is a bummer, but believe me, if something bad does happen you'll be glad you did. Being prepared for the unexpected is a major part of having a healthy financial life. !

Americans Have Weak Financial Safety Nets

In a recent study, conducted by MetLife, nearly three quarters of Americans said having financial security is vital for achieving the American Dream. Americans want to provide their own security rather than having to rely on anyone else. However, 70% also indicated that they don't have an adequate financial safety net. See the interactive visual that shows how much coverage each of the generations has for different types of financial safety nets.

Interestingly, the study reveals that the American Dream is less about living large and more about attaining a comfortable, modest lifestyle that's based on personal values. You can download the results of the 2011 MetLife Study of the American Dream here.

Here are 5 safety nets you should start building today:

Safety Net #1: Reduce Debt

Being prepared for the unexpected is a major part of having a healthy financial life.

Having less debt takes the pressure off if your pay is cut or you lose your job or business. Reducing what you owe may also be the key to living within your means if you have a tendency to overspend.

What most people don't realize is that you can actually reduce your debt for free! First, work on reducing high-interest debts that don't come with a tax deduction-like payday loans, retail accounts, and credit cards-by doing the following:

Apply for a low-interest loan that you can use to pay off high-interest credit cards. Investigate your options with a local bank, credit union, or peer-to-peer lender like prosper.com.

Use a balance transfer card that has a reasonable annual percentage rate (APR) after the promotional period expires.

Refinance high interest installment loans for a lower rate.

Modify a mortgage to take advantage of current low rates

Chapter 5 of my book, Money Girl's Smart Moves to Grow Rich, gives you more clever options and details about how to deal with debt. The money you save can go a long way towards plugging holes in the next 3 safety nets that I recommend.

Safety Net #2: Accumulate an Emergency Fund

The second important safety net is to make it a goal to set aside a small amount each month to start or build up your emergency reserve fund. Ideally, you should have 3 to 6 months' worth of living expenses to fall back on in case something unexpected happens.

Keep your emergency money in an FDIC-insured bank account, like a rewards savings or money market deposit account. It's never wise to invest your emergency money because you want to keep it absolutely safe from market volatility and risk. It's great if you can earn a modest interest rate on your cash reserves, but remember that you need to protect those funds like a junk yard dog so you can tap them right away, if needed.

Safety Net #3: Have Adequate Insurance

[[AdMiddle]Managing risk for you and your family by having enough of the right kinds of insurance, like health, life, and disability, is the third powerful safety net to have in place.

According to the Council for Disability Awareness, the odds of becoming disabled are probably higher than you think. One in 4 of today's 20 year-olds will have some kind of injury or illness that causes a long-term absence from work before they retire. Disability insurance allows you to keep up with your bills and meet living expenses because it replaces all or a portion of your income while you're recuperating.

Don't assume that all insurance is expensive; in many cases, the monthly premium for a disability or term life policy is comparable to the cost of a data plan for your cell phone!

Safety Net #4: Invest Using Retirement Accounts

Lastly, once you accumulate emergency funds and have adequate insurance in place, it's time to build wealth for your future retirement. Using tax-advantaged retirement accounts at work or on your own is a smart way to grow your money and cut your taxes at the same time. Just about everyone is eligible to open up an Individual Retirement Arrangement (IRA) and contribute a maximum of $5,000 for 2011.

To find out which type of IRA is best for you, read What is the Difference Between a Traditional and Roth IRA?

Taking these small steps to plug the holes in your financial safety nets will give you peace of mind and put you in the best position to deal with any unexpected hardship.

Get More Money Girl!

Find out how to work with me for one-on-one financial coaching or book me for a speaking event at SmartMovesToGrowRich.com.

There's a huge archive of past articles and podcasts if you type in what you want to learn in the search bar at the top of the page. Here are all the many places you can connect with me, learn more about personal finance, and ask your money question:

Download FREE chapters of Money Girl's Smart Moves to Grow Rich

If you enjoy reading Money Girl, you'll love my award-winning book Money Girl's Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don't. It's available at your favorite book store in print or as an e-book for your Kindle, Nook, iPad, PC, Mac, or smart phone. You can even download 2 free book chapters at SmartMovesToGrowRich.com!

Image courtesy of Shutterstock

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How to Build Safety Nets for Your Personal Finances

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Have you ever felt stressed out about money? Most people know what it’s like to get caught short without enough cash in the bank or to lose sleep over mounting debt.