A Better Way to Manage Your Everyday Money - Book - Page 111
continue for years? Will you be able to return to the same type of job, or business, or is the
interruption such that a career change is needed? Perhaps you will have been permanently
removed from the workforce.
You will have to decide on the amount of money and/or insurance that you want in reserve to
cover an unexpected loss of income. For a monetary reserve, you could put the funds in a
separate savings or investment vehicle that you set up for that purpose. Or you could consider
part of your other long-term saving and investment plans as your reserve.
The bottom line for an unemployment reserve is that you consider your options and put a plan in
place with which you are comfortable. You might consider discussing the issue with a
professional financial advisor and/or insurance agent.
Putting your money to work
The money you set aside in long-term savings is not kept in your checking account. Instead, you
put your money in other types of savings and investment accounts to take advantage of value
growth, simple interest, or compound interest to grow your savings as quickly as possible.
● Value growth – There are two categories of company stocks and investing styles. Value
investors look for stocks they believe are undervalued by the market (value stocks) that
can be sold for a profit, while growth investors prefer stocks that they think will deliver
better-than-average returns (growth stocks) when held for the long-term.
● Simple interest – Interest on a simple interest account is calculated using the total of
deposits into the account. Interest earned in previous periods is not included in the
calculation of interest for the current
period.
● Compound interest – Interest in a
compounded account for the current
period is calculated on the total of
deposits into the account, plus all
accumulated interest from previous
periods. The balance in a savings
account that compounds interest grows
much faster than the balance in a simple
interest account.
There are calculators in PerNetFlow for
estimating current and future values for simple
and compound interest accounts.
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