Unexpected events can have a dramatic and lasting effect on your financial future if you aren’t prepared. With a bit of planning and saving in the present, you’ll be able to handle emergencies if and when they happen down the road. Here are 5 tips that can help keep your life going when disaster strikes.
Build an Emergency Fund
The most important action you can take to prepare for the unexpected is to build an emergency fund. This buffer account should contain enough cash to cover at least three to six months of expenses. The more dollars you can put in the fund, the more breathing room you’ll have if an emergency occurs, like a job loss or serious illness. If you have a family, consider building an emergency fund that can cover a year to provide a good cushion for your family.
Obtain Life Insurance
You want to have a quality life insurance policy that will provide for your family should something happen to you. The value of your policy benefit should provide enough money for your beneficiary to cover your funeral costs, pay off any debts you have, and cover the cost of living for your dependents after you’re gone. You may also consider the cost of your kids’ education as well. For more on how to calculate the coverage you need, check out this post on how to determine the right amount of life insurance for your needs.
Consider Additional Insurance
Having insurance won’t provide for all your expenses if an unexpected event occurs, but it will make a big difference. If you fall seriously ill, medical bills can quickly add up. You should have health insurance coverage to soften the blow. If you’re injured and can’t work, you’ll be saddled with medical bills AND you won’t be able to make money. Make sure to research the best options for health, life, auto, homeowners or renter’s insurance to protect your finances. Depending on where you live, you may also need to plan for natural disasters like hurricanes, floods, forest fires, tornadoes, and earthquakes. Talk to your insurance provider about getting disaster coverage if you’re in a high-risk area.
Make a Backup Budget
Along with working an emergency fund into your finances, you should also make sure to maintain and reassess your budget often. Ensuring that your budget is in good shape and efficient is not only a great habit, but it will also help you prioritize and adjust items more easily to cover any unexpected costs. You may also consider creating a backup budget that streamlines your expenses in an emergency situation. Look over your current budget and figure out what you can cut if necessary. Planning an emergency budget now will make it much easier to deal with a crisis if it comes.