Article: Excerpts from article-the effect of employment status on household's emergency funds;research and author by alicia rodriquez-flores mba,sharon a devaney ph.d.article appears in the journal of personal finance,volume 5,issue 4 2007;

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Puthan(VJ) Vijayan is the Principal member of PMV Investment Advisors, LLC. The firm is a Registered Investment Advisor. VJ is a Certified Estate Planner and Registered Financial Consultant, with over 15 years of planning and investment experience.

JOURNAL OF PERSONAL FINANCE IS PUBLISHED BY INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS(IARFC);

ABSTRACT-'THIS STUDY INVESTIGATED THE IMPACT  OF EMPLOYMENT STATUS ON THE LIKELIHOOD OF HOLDING ADEQUATE EMERGENCY FUNDS.ADEQUACY WAS DEFINED AS HAVING FUNDS TO COVER 5 MONTHS OF HOUSEHOLD EXPENSES'
SUBJECTIVE(THE AMOUNT IDENTIFIED BY HOUSEHOLDS),QUICK,AND COMPREHENSIVE FUNDS WERE ANALYSED USING DATAS FROM THE 2004 SURVEY OF CONSUMER FINANCES'
'LOGISTIC REGRESSION SHOWED THAT SELF-EMPLOYED AND RETIRED HOUSEHOLDS WERE MORE LIKELY THAN WAGE-EARNERS TO HOLD ADEQUATE EMERGENCY FUNDS.'
'ALSO AGE,EDUCATION,AND SPENDING LESS THAN INCOME WERE SIGNIFICANT PREDICTORS OF ADEQUACY FOR EACH MEASURE.'
'AS AGE AND EDUCATION INCREASED AND IF THE HOUSEHOLD SPENT LESS THAN INCOME, THEY WERE MORE LIKELY TO HAVE ADEQUATE EMERGENCY FUNDS.'

CONCLUSIONS AND IMPLICATIONS

'BASED ON A SUB-SAMPLE OF THE 2004 SURVEY OF CONSUMER OF FINANCES,
15% SUBJECTIVE
16% QUICK
33% COMPREHENSIVE EMERGENCY
OF THE HOUSEHOLDS MET THE CRITERIA OF FIVE MONTHS OF INCOME'
'THE LOGISTICE REGRESSION SHOWED THAT EMPLOYMENT STATUS WAS SIGNIFICANTLY RELATED TO THE LIKELIHOOD ADEQUATE EMERGENCY FUNDS.'
'THE LARGEST ODD RATIOS FOR THE LIKELIHOOD OF HOLDING ADEQUATE LEVELS OF EMERGENCY FUNDS WERE FOR RETIRED HOUSEHOLDS AND THE SECOND LARGEST ODD RATIO WAS FOR SELF EMPLOYMENT.'

'BUT THIS STUDY ALSO ANALYZED SUBJECTIVE MEASURE AND SHOWED THAT EMPLOYMENT STATUS WAS SIGNIFICANTLY RELATED TO THE SUBJECTIVE MEASURE.'
THE USE OF SUBJECTIVE  MEASURE FOR ADEQUACY IS AN IMPORTANT CONTRIBUTION OF THE RESEARCH-'THE SUBJECTIVE MEASURE CONSIDERS THE HOUSEHOLD'S OPINION OF WHAT IS AN ADEQUATE LEVEL OF SAVINGS FOR EMERGENCIES'
THE OUTCOME EMPHASIZE 'THE FOCUS ON THE PRECAUTIONARY MOTIVE OF SELF-EMPLOYED AND RETIRED INDIVIDUALS.'
ENTREPRENEURS ARE LIKELY TO ASSUME MORE RISK AND HAS GREATER NEED FOR LIQUID ASSETS.'
OLDER FINANCIAL CONSUMERS ARE LIKELY TO HOLD MORE LIQUID ASSETS BECAUSE OF UNCERTAINTY.
AS MENTIONED EARLIER, AGE WAS POSITIVELY  RELATED TO THE LIKELIHOOD OF HOLDING ADEQUATE EMERGENCY FUNDS FOR SUBJECTIVE,QUICK,AND COMPREHENSIVE CRITERIA OF FIVE MONTHS OF INCOME.
THE MORE EDUCATED WERE LIKELY TO HOLD ADEQUATE FUNDS, BUT FOR QUICK AND COMPREHENSIVE AMOUNTS.
RACIAL AND ETHNICITY DID NOT PLAY ANY ROLE FOR SUBJECTIVE FUNDS.
FOR QUICK AND COMPREHENSIVE MEASURES , WHITE HOUSEHOLDS MORE THAN OTHER HOUSEHOLDS, WERE MORE LIKELY TO HOLD ADEQUATE LEVELS OF EMERGENCY FUNDS.
HOUSEHOLD SIZE DID NOT INDICATE ADEQUATE COMPREHENSIVE EMERGENCY  FUNDS FOR ANY OF THE MEASURES.
RISK TOLERANCE WAS NEGATIVELY RELATED TO THE LIKELIHOOD OF HOLDING ADEQUATE LEVELS OF COMPREHENSIVE EMERGENCY FUNDS.BUT IT WAS NOT SIGNIFICANT TO  SUBJECTIVE AND QUICK MEASURES.

SO, FOR THE SUBJECTIVE MEASURE,'ONLY EMPLOYMENT STATUS,AGE,AND SPENDING LESS OR EQUAL TO INCOME WERE  SIGNIFICANT PREDICTORS OF HOLDING  ADEQUATE EMERGENCY FUNDS.'
WAGE EARNERS WERE  LESS LIKELY TO HAVE ADEQUATE EMERGENCY FUNDS;UNAWARE OF IMPORTANCE TO HAVE BUFFER FOR INCOME SHOCK.'

'FOR THE QUICK MEASURE-EMPLOYMENT STATUS,AGE,EDUCATION,RACE AND SPENDING LESS THAN INCOME WERE SIGNIFICANT PREDICTORS OF HOLDING AN ADEQUATE LEVEL OF EMERGENCY  FUNDS.THE RESULTS EMPHASIZE THE IMPORTANCE OF ADVISING HOUSEHOLDS BASED ON THEIR AGE,EDUCATION-YOUNGER HOUSEHOLDS MAY NEED MORE GUIDANCE THAN OLDER HOUSEHOLDS.IT ALSO EMPHASIZES THAT HOUSEHOLDS MAY NEED HELP BUDGETING AND MANAGING THE USE OF DEBT, SO THAT THEIR SPENDING WOULD NOT EXCEED THEIR INCOME.

FOR A COMPREHENSIVE MEASURE-AGE,EDUCATION AND SPENDING LESS THAN INCOME ARE PREDICTORS OF HOLDING ADEQUATE LEVEL OF EMERGENCY CASH.33% OF HOUSEHOLDS WILL PUT THEIR CASH INTO INVESTMENTS THAT ARE MORE PROFITABLE THAN CHECKING AND SAVINGS ACCOUNTS

'FINANCIAL ADVISORS TO HOUSEHOLDS SHOULD DISCUSS WITH THEIR CLIENTS THE LIKELIHOOD OF ENCOUNTERING AN EMERGENCY AND WHETHER THEY FEEL THEY CAN HAVE ADEQUATE CURRENT RESERVES TO COPE WITH SUCH AN EVENT.
WAGE EARNERS MAY BE MORE VULNERABLE THAN RETIREES AND SELF EMPLOYED HOUSEHOLDS AND MAY NEED MORE HELP.'

PUTHAN(VJ) VIJAYAN CEP RFC MBA
INDEPENDENT FEE BASED FIDUCIARY WEALTH MANAGEMENT
PMV INVESTMENT ADVISORS,LLC
20720 WATERTOWN ROAD
SUITE 106
WAUKESHA, WI 53186
262 754 1672

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