Building financial resilience without hoarding cash
By Before we get into this month’s newsletter, allow me to take a moment to introduce myself: My name is Scott Zavitz, and I’m the newest Wealth Advisor at Family Financial Partners. I came to be part of this family after a 15-year career in marketing and public relations with the University of Miami football and basketball teams and, most recently, McClatchy.
Throughout my marketing career, I learned that many people — small businesses, individuals, colleagues — could use an extra ear when making big decisions, and that drew me to the world of financial advising. There’s more than one way to grow your wealth, and it’s exciting for me to be a sounding board as you make decisions about your financial life. We’re not the president of your finances; we simply advise you and help guide you toward a financial strategy that reflects your goals and unique situation.
When working with newer investors, one of the first things I encourage investors to put into practice is building an emergency fund. It’s a common practice that you’ve probably heard a lot about by now, but we still get lots of questions about exactly what that should look like.
Simply put, the role of an emergency fund is to cover those unexpected expenses that pop up for most people from time to time. Whether it’s a car repair, a new roof, or an HVAC replacement, costs like these can arise and may occasionally require you to reach beyond your budget.
I like to see 3-6 months of your budget expenses in that emergency fund. If you have a stable job and a low risk of losing it, we may be able to lean closer toward three months. If you have a job that can be more volatile, then it may make sense to have a full six months in reserve.
I like to use a high-yield savings or money market account for emergency funds, because they may offer higher interest rates than some traditional bank checking or savings accounts. And here’s the key: Consider automating contributions to those accounts from your checking account or even directly from your employer. Automation is out of sight, out of mind, but in a good way. It can make it easier to maintain a consistent savings habit. You’re building muscle memory for saving.
Now be careful: It’s easy to see additional interest credited each month and be tempted to keep funding that account beyond six months of expenses. You’re used to saving in your high-yield savings account, and it can make you feel good and financially secure.
But once you get to that level, it may be worth seeking potentially higher returns on your cash. Depending on your objectives, risk tolerance, and overall financial situation, that could include retirement accounts, stocks, real estate, or other options. While some investments have historically provided higher long-term returns than HYSAs, they also involve varying degrees of risk, including the possible loss of principal. The appropriate approach for building wealth will depend on your individual circumstances and goals.
This is where an experienced financial advisor can come in handy. If you think you may be oversaving, it may be worth having a conversation with a professional to evaluate your options and determine the next step.
As the new guy at FFP, I really love meeting current and potential client families like yours. If you haven’t taken the leap and started working with a financial advisor, I’d be happy to meet with you, look over your current financial picture, and help you develop a plan that fits your goals and long-term objectives.
Reach out to me or anyone else on our team, and let’s get started on your journey toward building wealth for generations.
All investing involves risk and there can be no guarantee that any investing strategy will be successful. Past performance is no guarantee of future results.
Article by Scott Zavitz, Wealth Advisor at Family Financial Partners — a financial services firm in Lexington, Kentucky.