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Thursday, November 20, 2008

The Four Key Areas Of Finance: Security

Managing your finances may seem like an overwhelming task. However, if you break it up into smaller sections, it becomes much easier.

There are four key areas that you should look at when first organizing your finances. These areas are: security, stability, growth and management.

Within each area you will find goals that you need to work towards. You can't successfully manage your finances by simply looking at one area. They are all necessary.

Security is the area in which you prepare for the unexpected. This is where you insurance comes into play. Many people have great retirement savings, little debt, but no insurance. They are financially vulnerable.

Life insurance, health insurance, auto insurance, homeowner's insurance and disability insurance all protect your from life's accidents and emergencies. Each type of policy is important.

Start by pulling all of your policies together and reveiw them to make sure that you have enough coverage. If you don't, make it right. Depending on the amount of time you want to devote to this, you can even do some shopping around for new policies. Make a list of your basic policy information and the contact numbers. Keep this information in your safe deposit box in case of a home disaster.

If you can afford to purchase disability insurance you should. Most young people have a greater chance of becoming disabled than dying. Research this type of insurance and decide what is right for you.

If you own anything, even just a vehicle and nothing else, you must have a will. You need to have a will that states what happens to your money and your children if something happens to you. If you don't have a will, this decision will be made by a court appointed official.

A will doesn't have to be extensive, in many states you can simply use a premade form purchased from an office supply store. Make sure you check to see if your state has any requirements when it comes to wills and trusts.

Having a will isn't enough. If you already have one, you need to read it and update it every year. There are many changes in life, and you need to keep your will updated. You don't want the state deciding who gets what and where you things go. And you don't want to put your family through any uncertainty about what you would have wanted.

Now to the money part of security. It is vital that you have an emergency fund. Most advisors recommend having between three and six months of expenses in savings. I know this takes a while, but it is worth it. It will prepare you for any financial disasters you may face, from layoffs to car repair bills. It frees your budget from the unexpected. You are able to repair what needs repairing and pay what needs paid without worry. Make saving into an emergency fund a priority.

Hopefully, your security won't ever need to be called on. But if it is, you will be financial sound by having it in place. It is important to protect what you work so hard for.

Martin Lukac represents student finance direct and student finance direct, a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!

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