Financial cushions are critical

If you have invested money that you could potentially need in the near future, the decline in value could be a threat to your livelihood. One way to solve this problem is to make sure you have an emergency financial cushion to help you get through a period of income loss. A good emergency pillow should cover at least six months of your monthly expenses. But the coronavirus pandemic has taught us that it is better to create such a financial instrument for a year.

If you have extra money that you can save, you can create your own financial cushion from these savings. If your budget needs to be revised in order for you to reach this goal, there are several ways to do so. You can temporarily funnel money into it from another savings goal or eliminate unnecessary spending until the account has a balance that you think is sufficient.

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