The Tools of Personal Finance

Life, like personal finance, is unpredictable, and we must be prepared for the unexpected twists and turns.  Being prepared financially takes a number of steps and tools outlined below:

1. Well-Funded Checking Account. This is the first line of defense against financial disaster.  Our goal is to never run out of funds in our checking account and to grow this cushion, we avoid spending money on some frivolities. 
2. Emergency Fund.  This is a small pile of money sitting in a separate savings account away from our main checking account.  Emergency fund is the second line of defense meant to catch heavier blows to our finances that our checking account would not be able to sustain.
3. Monthly Budget.  Monthly budgeting is an essential tool to plan expenses in accordance with needs.  While a budget will not save you from financial disaster, completing one will only benefit you in the long run. 
4. Life Insurance.  A life insurance policy that would provide for a comfortable living to the surviving party by paying out a large sum of money to be invested to create monthly cash flow is a good investment vehicle. 
5. Last Will and Testament.  You cannot always predict life, but at least you can prepare for it with a will.

See Prepare for Financial Disaster: You Need a Swiss Army Knife of Personal Finance, Money Ramblings of a Financial Underdog, Sept. 29, 2014.