Tips to creating a freedom plan while working is the same as tips for financial freedom!
For employees who want to change jobs or are out of jobs for a while, how do you take care of yourself?! One of the best things you can do to protect your wallet is to have a financial backup plan.
Financial backup plans are useful for individuals who don’t have a strong credit history, or for those without retirement accounts. So what does this mean?
What it does mean
A Freedom plan is an investment of one’s savings to provide income when one cannot work. In other words, it’s an insurance policy that provides a source of income in case life throws you off track and you find yourself unable to work. It’s also great for providing stability if your job situation changes suddenly!
What does it do?
A financial backup plan allows you to have short-term income which can be used to provide yourself with the daily necessities in life.
This is especially helpful if you are unemployed and looking for a job. For example, while you may feel like you’re overqualified for some of the available jobs, you can use your financial backup plan as a security net and know that if an opportunity comes along for a position that’s below your skill level, but is more stable, that you can take it without having to worry about how long it will last or how stable it will be.
Why is it necessary?
A Freedom Plan in a Work Place is very necessary to both the employer and employee.
A freedom plan is a tool that can help the employee and employer when they are not working together.
The plan allows them to know what would happen if one of them were laid off or terminated. They consider this as they go through different business practices and decide how much risk they want to take with their employees.
For potential dealings
Having a freedom plan could come in handy as employees are sometimes allowed to invest while they work.
A financial backup or freedom plan can also help an employer during legal proceedings, where the company is required to prove how it will pay its debts if there is a bankruptcy or liquidation underway.
This outline can be used by both parties so that they are not caught by surprise, which opens up opportunities for both parties in the future as long as they abide by its guidelines.
This is why a financial backup plan in an employer-employee relationship is needed so they can structure their business relationship properly.
4 Tips to creating a Freedom Plan while working
To avoid being stranded if one loses his or her, here are some steps to creating a backup plan for savings. Aside from the contingency plan of having more sources of income, here are some tips for the big plan.
- Make a financial plan for the years ahead so that you know specifically how much of your total income is allocated to savings. Build some emergency cash funds, at least enough to cover six months of expenses, in a savings account.
- Use Roth or traditional IRAs to save money outside the work environment. Have an emergency fund with at least three months worth of living expenses in cash, investments, or checking accounts.
- If you have children and are concerned about how they will manage without you if something were to happen, develop separate plans for them as well as yourself and make sure they have access to emergency money should it be needed.
- Think of your assets as a package with cash at the top, stock options and mutual funds in the middle, and real estate at the bottom. If you need to liquidate assets quickly, start with those at the top and work your way down. Develop a plan that is flexible enough so that it can be modified if your financial situation changes unexpectedly.
Benefits of having a freedom plan while working
Here are some reasons why you should create a financial backup plan for your work, family, or yourself;
- You may not be aware of your company’s financial health.
- You may not have a life insurance policy or other personal savings to cover the costs of your spouse and dependents if you die prematurely (or suffer a long-term disability).
- Your employer might offer death benefits that are less than what is needed to cover all the costs associated with death.
- Your employer might not offer life or disability insurance.
- Without an emergency fund, you could be forced out of work because you don’t have income when short-term disability payments run out, but can’t return to work because of illness or injury.
- Your employer might be forced to let you go because you cannot meet the company’s financial obligations if it goes out of business.
The ability to have financial backup plans may be more important than you realize. Just like any other piece of insurance, your income and assets can be affected by something as simple as a change in your health or accident-related care expenses.
Most people don’t think about policies as a way to help them survive a sudden, devastating illness, but they could save hundreds of thousands of dollars if they need expensive medical interventions or are unable to work for an extended period.
When you feel like everything is going well, there’s a great tendency to ignore your financial planning and rely on the future to be more prosperous.
It’s easy to forget that things might not always go as planned and that while you might be able to make it through some rough patches without putting anything in a place financially, it can be difficult at best.
To avoid regret in the future or even traumatic events of being completely wiped out by a sudden crash of your company or career, consider setting aside money regularly as a backup plan.