Tragedy strikes; it’s an inevitable part of life. How we prepare for what life throws at us makes all the difference in how we deal with the event, no matter what it is. Do you have a financial backup plan? If you should lose your job, experience a death or undergo one of life’s many other drastic changes, will you be able to cope financially? If you answered “no,” there is no better time than now to devise such a plan.
Here are five ways you can get started today:
Take a close look at your spending habits and find things that you can eliminate. Do you have a Starbucks habit? Do you subscribe to the newspaper when you can just as easily read it online? Do you have an expensive cable package that you can scale back? Chances are that if you look at the way you are currently spending your money, you will be able to find ways to save. Many people who closely examine their spending habits find that they can save between $50 and $100 every month.
The standard goal is to build a savings account that can support you for at least three months. By “support you,” this means make all of your loan, mortgage and utility payments for three months. Once you have met your goal, continue to save and create an even bigger monetary buffer between yourself and disaster. In addition to an overall goal, decide how much you will need to put away each month in order to meet your goal in a certain amount of time.
Research your options when it comes to a bank account. You may find that your local credit union offers more attractive interest rates than your local bank. Research banks and the various accounts they offer carefully, not all are created equal. If you already have a savings account, don’t feel as though you are stuck; you are free to move your money as you see fit, as often as you see fit to do it.
It is not uncommon in marriage for one spouse to take care of the bills, whether or not both partners hold down a career outside of the home. Are you aware of the money that is leaving your house each month and where it is going? If you are faced with divorce, being ignorant of this information can be disastrous. The same can be said if your partner suddenly passes away and you have to take a crash course in the home’s finances.
Credit card debt is one thing when you have two incomes or simply just have a steady job that enables you to pay those bills. What happens when you lose an income? You don’t want to have credit card debt to worry about on top of your everyday finances. Credit cards should be paid off every month or, at the minimum, balances should be kept as low as possible. Try to stick to one major credit card, a gas card and a department store credit card if you can. Keep your major credit card as a backup for emergencies if you can.
Creating a financial backup plan will behoove you should you find yourself faced with one of life’s many challenges. Whether it’s a medical emergency, loss of a job or sudden death of a spouse, events occur that are out of your control; don’t let worrying about your finances add to an already stressful situation!
Sheila Barnett writes on personal finance and budgeting for financial calculator, a site with helpful tools and information about debt management and financing; check out this free retirement calculator!