In this day and age, nothing is certain except for
uncertainty. For this reason, it’s always a good idea to have an emergency
savings fund, money that you have available but don’t touch unless absolutely
needed.
However, just as it’s important to have “just in case” money
on hand, it’s also important to invest. For those who don’t have enough
disposable income to both invest and save, they often question whether or not
they should invest part of their emergency fund. The answer to that question
isn’t a simple one. It depends on a lot of factors and is a a decision best
made with the help of a qualified financial advisor. With that said, however,
there are a few tips that can allow you to determine whether it’s better for
you to invest your nest egg or keep it safely stashed.
When You Have More than You Need
One of the first things to consider when trying to determine
whether to invest or save is to look at the current amount you have in your emergency
fund. It’s generally recommended that you have at least six months worth of
money stashed away just in case.
So, look at how much you need to survive in a given month.
If you already have that times six or even more, then you’re probably safe and
even smart to invest a portion of it.
When You Can’t Predict Your Income
Investments can be a wonderful way to earn money, but
sometimes, even the best-planned investments can still lead to money loss. Thus
the smartest course of action is to replenish the money you’ve invested from
your savings account as soon as possible after you’ve invested it. That way, if
there is a loss, you won’t feel it quite so much.
However, if you don’t have a predictable income, such as
when you’re an independent contractor or your business regularly goes up and
down in terms of profits, it may not be the best time to invest. Generally,
investments should only be made when you’re in a very stable and predictable
financial place and can afford to take a financial loss if it comes to that.
While these tips can help in making your decision, remember
it’s really best to make these tough choices with expert help. Thus, it’s
highly advisable to not make any investment decision without qualified,
professional help and advice guiding the way.