From the mundane to the catastrophic, there’s never a good time for a financial emergency. The funny thing about these emergencies, though, is the fact that they’re never surprising at the core; they’re all inevitable at some time or another, but few are prepared when it happens to them.
Common Unexpected Expenses
No matter what the emergency is, it can have a devastating impact on the unprepared bank account. Whether someone was unsafe during the holiday season, an employer must downsize or similar, emergencies are just another obstacle to prepare for. Here are some of the most common emergencies that families face daily:
- Loss of Job: The economy still isn’t great, and while more jobs are being created, companies find themselves needing to downsize all the same. Because of this, you might find you’re unexpectedly out of what you believed to be a secure job.
- Health and Medical Issues: Another very common cause for personal bankruptcy in America, just one accident could result in hundreds of thousands in debt without health insurance.
- Other Accidents: Accidents can result from all sorts of places; a sudden collision can total your car, or your basement can become water damaged after a flood. No matter what, an accident is going to cost money, so not having a plan hurts you.
- Natural Disaster: Depending on your geographical location, risks for certain environmental dangers are higher.
How to Prepare for the Future
Above all, it’s important to realize that an emergency is inevitable, so you must prepare for your financial future. One great way to start is to establish and maintain an emergency funding account. It’s hard to say exactly how much you should save up, but here are a few suggestions to keep in mind when planning your new budget:
- Keep at least six months’ of expenses available
- Keep enough money to pay all deductibles from insurance policies
- Keep enough money to pay the annual out-of-pocket health insurance maximum
- Maintain a network of trustworthy support
Whether friends or family, be sure to talk to someone who has extensive experience with finances and the like. This way, you can be sure to have someone to talk to in the event of an emergency situation.
If you can’t find the extra money to save aggressively, there are several ways to improve your total income. For example, it is possible to get a second job or pick up freelance work for side money.
The fact of the matter is that unexpected expenses will eventually occur whether you plan for them or not–so why not make the responsible choice today and start a savings account? Not only this, but it’s worth to get a health savings account in case something occurs medically; it can be very expensive to live without health insurance, so the sooner you get that, the less of a burden it will be.
Finally, be sure you always have sensitive paperwork filed away. Nobody has fun with estate planning, but it’s important to get done. Be sure documents like powers of attorney, wills and trusts are all fully updated.
Photo: peddhapati / CC 2.0