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Are you willing to risk losing all the wealth you've worked so hard to accumulate on a single throw of the dice? Here's how to build a financial safety net that gives you all the security you need to cope with any financial emergency and prevent financial disaster.

A strong financial safety net is like a solid table with four substantial legs:

* Cash reserve or emergency fund

* Life insurance
* Disability insurance
* Health insurance

CASH IN RESERVE WHEN YOU NEED IT MOST

Your cash reserve is your first line of defense in an emergency. Most experts recommend a reserve of three to six months living expenses. This may seem excessive, but the sudden loss of a job or a huge repair bill can put you in serious financial trouble without this safety net.

It will take time to build your cash reserves, but you might be surprised at how quickly you will accumulate the funds if you set up regular, automatic deposits to your account either with direct payroll deposit or transfer from your regular checking account. Once you're accustomed to the regular deposits, you won't even miss the money. Then, when you've reached your goal of three to six months reserve, you can continue investing the money in longer term, high yield investments for even greater security.

The best place to "park" your emergency funds is in an interest bearing money market or similar account. You might need the money in a hurry, so it's best to avoid CDs or any other investment that would hit you with an early withdrawal penalty. Most money market funds allow you to write checks directly from the account, so you'll have instant access when you need it.

ENSURE YOUR FAMILY'S PROTECTION WITH LIFE INSURANCE

Be sure you have adequate life insurance, especially with a young, growing family. Eight to ten times your annual family income will ensure your family's protection. It's hard enough to lose a loved one without the added worry of mountains of bills and no money to pay.

INCOME IF DISASTER STRIKES

Suppose you're injured or suffer a long term illness and are unable to work? Long-term disability insurance will help replace lost income and keep you from being wiped out financially. Most employers offer disability coverage at reasonable cost. It's a small price to pay knowing you'll still have an income if disaster strikes.

HEALTH INSURANCE PROTECTS YOUR ASSETS

What if you or another family member were seriously injured or suddenly stricken with a major illness? A hospital stay can easily cost hundreds of thousands of dollars. A single chemo treatment could cost you over $20,000. Health costs today are insane! Nobody can withstand that kind of financial impact. The real reason you need health insurance is to protect your assets.

You and your family just might make it through life with no real financial emergencies. Then again, you might not. Ensuring your long term financial health with a financial safety net may be a drain on your budget, but the alternative is unthinkable.

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Sources:
http ://www.wachovia.com/personal/p age/0,505_513_1091_1099_1253,0 0.html
http://financialplan.abo ut.com/cs/personalfinance/a/Fi nlSafetyNet.htm

Learn more about this author, John McDevitt.
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