For many years, we have heard our federal and state politicians talk about “unfunded liabilities” of the government.

An unfunded liability is any liability or expense that does not have sufficient savings or investments set aside to pay for it. The party responsible for paying the unfunded liability pays for it out of current income or savings or by borrowing the funds.

The risk of an unfunded liability is two-fold:

1) The payee may not receive payments which they are entitled to

2) The payer may experience financial stress

Although the government must address these issues in the coming years, we often overlook the fact that these issues may also extend into our personal lives.

In our 20s, an unfunded liability might be an unexpected repair that could require using our savings or borrowing from our credit card.

Later in life, unfunded liabilities can be more serious. For some, a health crisis could result in unexpected and unaffordable medical expenses.

While the unfunded liabilities of the government may seem overwhelming, establishing a regular personal savings plan and investing wisely can help alleviate the burden of personal unfunded liabilities. Consulting a financial professional can assist you with evaluating and managing your portfolio to help mitigate your personal exposure.

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