Question

5.      Investment advisers typically advise emergency fund of 6 months salary reserves as appropriate to meet contingency need against unpredictable disruption. You are currently living pay check to paycheck, provide a solution to mitigate these uncertainties by ensuring sufficient liquidity. (300 words)

Answer 1

There should be an emergency fund in order to to survive through adverse economic situations and mitigate all the unpredictable risk in order to survive in the longer perspective.

investment advisors are often advising for investing into emergency funds for a minimum of six months salary is because they proactively advice for management of these tough situations so that an individual can sustain and survive through liquidity and financial crisis.

solution for mitigation of uncertainty by ensuring optimum liquidity when an individual is living paycheck to paycheck are-

A. Preparation for these adverse situations by proactively investing into emergency funds.

B. Cutting on to the expenditure by a large proportion can also help in order to gain this financial independence to invest into emergency funds

C. Individual can also look for an additional income source so that he can add to his overall income and he can help himself in saving a lot of the proportion of income

D. Cutting on to the unnecessary expenditures and saving those incomes in investment funds so that it could be used in emergency Times

E. He can also invest into various high liquid growth funds which will be Mutual Funds in order to help himself survive through this crisis Times

F. Generally Gold is considered as an alternative as these times approach, so he will have to invest into gold and other secure assets to help through emergency situations.