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What does it take to build a financial safety net? Three things:

1. Knowledge

2. Will Power

3. Won't Power.

Of these, knowledge is the easiest to obtain and you can find it here. You need to know how buy what you need at a good price, how to save, and how to invest. However will power is the power to just do that. Will power is the ability to take the time to learn good financial management, where the bargains are, where you can save to get the best interest rate. It is the ability to say, "I will buy the appropriate insurance for my situation." In short, will power is the ability to do what you should.

More important than will power, however, is Won't Power. This is the power to say, "I won't buy that item I don't need, no matter how attractive it is or how persuasive the sales person is." "I won't try to "keep up with the Jonese." You cannot effectively build a safety net until you have your spending under control and that takes Won't Power. Learn to say "NO" and stick by it.

As for knowledge, one article is too short to contain it all. However there are some tips that will get you started.

1. Get appropriate insurance. That means health and life insurance, perhaps even loss of income insurance if your job doesn't provide it. If you have to buy these on your own, shop around and don't let the first sales person you talk with convince you to make a hasty decision. For life insurance, I recommend declining term, a policy that covers your family's needs now but which declines as your investments grow. If you think you family will need $200,000 if you die, the initial insurance should be for that amount. However if you invest money and it grows to $100,000, then insurance only needs to cover the remaining $100,000. You can save money by not paying for insurance your family will not need.

2. Have a savings plan. Try to save enough to live for 6 months should you be unemployed or unable to work. At least a month's worth of that should be in passbook or other immediately available savings and the rest in something you can get within a month if you need it.

3. After getting insurance and saving for 6 months, look at suitable investments. This is a big topic so rather than discuss it here, I suggest you look at something like

http://www.helium.com/chan nels/Contest/knowledge/82265

Fo llow the above steps in the order given and you can build a safety net. In fact you will at the same time be building a nest egg for retirement, children's college or whatever else you need.

Learn more about this author, Hal Lillywhite.
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