Liquidity Analysis

No financial plan is set in stone. You never know when an emergency will arise requiring immediate funds to resolve. This could run the gamut from unexpected health expenses to a loss of employment. Of course, you would not want to be forced to put such expenditures on a credit card or take an early withdrawal from a retirement account, so you must have funds readily available for such purposes. 

How much should you have on hand? The general rule of thumb is to have enough cash to completely cover all expenses—rent or mortgage, debt payments, utilities, groceries, and any other recurring payments—for a three- to six-month period. Ideally, you should have a separate account set up dedicated to this: your Emergency Reserve Fund. 

All clients of Penn Wealth have easy access to view the funds available in their Reserve Fund. By navigating about halfway down the home page Snapshot screen, you will see a tile called Liquidity Analysis. Hovering over this tile will bring an upward-facing arrow into view. Select that arrow to be taken to the Liquidity Analysis section of your Personal Financial Website. Here you will find a graph of your target liquidity, actual liquidity, and any surplus or deficit. Below the graph, in the Action Items section, you can adjust your target and proposed expense buffer to a level you are comfortable with. By selecting the Details tab, you will see a list of your current monthly expenses in one column, and the accounts in which your emergency funds reside in another column. You should always be aware of your total current liquidity, and work to maintain an appropriate amount of liquid assets.