Life is unpredictable and you never know when something’s going to happen to change the course of your life. These changes may come in the form of sudden financial emergencies and, while you can’t predict exactly what will happen, it’s important to prepare for the eventuality that something will occur.
Planning for a Financial Disaster
We all know that things will eventually go awry, whether that involves unexpected car repairs, a medical emergency, a sudden need for home repairs, or another emergency requiring large sums of money. It’s always better to be prepared, which means setting up a savings account and adding to it from each pay period. While a standard savings account is one way to go, it may be better to start a high yield money market account or invest in either certificate of deposits or government investments. For this purpose, it’s best to avoid stocks, because you’ll want to have relatively fast access to the money in an emergency.
You’ll also have to determine the minimum you’ll need to save up cover an emergency. Depending on the occurrence, you may need enough income to cover up to three months of expenses. This type of long-term condition is common in cases where a natural disaster strikes or your home is destroyed by fire. In order to save enough, you’ll have to create a budget and examine where your expenses go each week and each month. This type of financial contingency planning can help you stay prepared for most eventualities.
The thing about savings accounts, though, is if they were there for every financial disaster there really wouldn’t be any financial disasters. Sometimes even when they are there, it’s not enough to cover the costs of an emergency repair or other sudden cost. Emergency borrowing may be required, but it’s important for consumers to carefully understand the terms of the loan agreement. Lenders specializing in these types of installment loans with an online application process are required to give consumers the information themselves. With this in mind, don’t pass it up when applying for the loan on their website.
However, it might be possible to face a financial crisis without substantial savings and avoid borrowing. Insurance, proactive habits, and going lean on luxuries could be the difference between a financial emergency which can be handled and one which breaks the bank.
Handling an Immediate Financial Crisis
When emergency expenses do arise, you’ll need to handle them hastily, especially where there’s the possibility of the condition worsening. Your first step should be to check your insurance policies. For instance, your homeowner’s policy will cover damages to your home and may pay for temporary lodging expenses. If this is the case, you don’t want to spend your money on items that are otherwise covered.
Of course, the best way to pay for a financial crisis is not to have one at all. This means religiously adhering to a schedule of preventative maintenance for your vehicles and your home. Similarly, ensure that everyone in your family has routine health check-ups, so medical problems can be identified early on. In many instances, early detection is the key to successful treatment. Left untreated, a prolonged illness can be costly and can cause the individual’s condition to grow more complicated.
Look for ways to minimize your expenses. Eliminate the cable or satellite service, sell a vehicle, or prepare all of your meals at home. You might also begin looking for ways to earn extra money to put toward your remaining everyday expenses. Have a yard sale to get rid of some items and earn instant cash, or look into freelancing as a second job.
One important part of financial responsibility is to be prepared for unexpected events. While you can’t predict when these events will occur, you know something will happen, sooner or later. Building a nest egg is critical to your survival in these circumstances. If you can give yourself a financial buffer, you’ll be better prepared to weather the financial storm in whatever guise it may come.