Key #3 – Build Liquidity
It’s a privilege for Family Life Radio to partner with other ministries, agencies and businesses across the nation—all of whom share the vision to help others experience hope in the name of Jesus. This month, please meet Brian Cochran and John Moore from John Moore Associates, a respected financial advice company founded on biblical wisdom.
Six keys to your financial wellness
Brian Cochran, CKA®, CFP®, Financial Planner
John Moore, CKA®, CIMA®, Principal
The John Moore Associates team could not be more excited to serve as a business partner with Family Life Radio. For over 21 years, we have helped families become intentional in their financial planning and investment decisions through the application of biblical principles.
Did you know there are over 2,000 verses in God’s Word relating to money and material possessions? From these Scriptures come six key principles that can serve as your foundation for wise stewardship and financial wellness.
- Spend less than you make
- Be prudent about debt
- Build liquidity
- Set long-term goals
- Act like a manager, not an owner
- Give generously
We addressed spending and debt in the first and second quarters (links). Today we will take a closer look at the third key: building liquidity.
Life is filled with uncertainty. Holding safe and stable reserves is your best risk-management tool. Unfortunately, many American households rely on debt to cover even the smallest financial emergency. A recent study by Bankrate found that 28% of Americans have no emergency fund at all, and 25% cannot cover three months of expenses with their savings. As financial advisors, we frequently meet couples of all ages who have funds in their 401(k) or in acquired real estate, but do not have sufficient liquid funds to pay for a new roof, a car repair or a surprise medical bill.
Building an emergency reserve is a difficult task that takes many households years to accomplish. That said, it is never too early to get started!
- Begin by opening a savings account at your local bank. The higher the yield the better, but the primary goals are accessibility and safety. Consider an online bank for higher yields. Resist the urge to invest your emergency reserves in volatile assets such as stocks or cryptocurrency.
Proverbs 21:5—Steady plodding brings prosperity; hasty speculation brings poverty.
- Set a goal of having $1,000 in the bank. You would be surprised at how many emergencies you can cover with $1,000 or less.
- Save a consistent amount of every paycheck. Many employers allow regular payroll to be split between your checking and savings accounts. Take advantage of this feature to automate your savings.
- Understand that your balance may take “two steps forward, one step back” as you face emergencies along the way. Do not be discouraged. The key is to slowly accumulate your reserves and move away from a reliance on high-interest credit card loans or other forms of debt.
- Consider using bonuses or tax refunds to boost your savings rate. Fight the temptation to spend these windfalls. You will not regret it when the dishwasher breaks down or the roof starts leaking!
- Once you reach your $1,000 goal, set a goal of having the equivalent of three months of your expenses. If you have a variable income or a risk of unemployment, consider saving for six months of expenses.
A strong emergency reserve covers short-term risks and allows you the privilege of thinking long-term. We will discuss the importance of looking at long-term goals next time!
More Keys to Financial Wellness: