We all hope for the best, but we should prepare ourselves for the worst. No one can foresee the future, but unfortunately, sometimes we are faced with certain circumstances which are beyond our control. A wise man is one who saves money for a rainy day so that unexpected events, don’t topple the finances. Today we are going to discuss how should one prepare for a financial emergency so that nothing brings you down.
Make an Emergency Fund
Always have an emergency fund which can come handy when you are at a loss of money. Today we live in an uncertain world where lay-off is common, and so are health issues. We should, therefore, have an emergency fund that could suffice us for at least six months to a year in case there is loss of income.This means that you would have a saving cushion which will come in handy if there is a loss of income. Rather than picking up credit card debt or taking loans to meet your expenses, when you are out of a job; having an emergency fund could offer you peace of mind and significant financial security.
If you are wondering how to start an emergency fund, then here what you should do:
• Keep a goal in mind e.g.; you would like to have three or six months living expenses saved.
• Keep money aside for emergency fund as soon as you are paid.
• If you get a bonus or some extra cash that too could go in your fund until you reach your target.
You might be tempted more than once to use your emergency fund or to divert this savings to for a probably more substantial return. But remember that emergency fund should be readily available and accessible. Invest it only at those avenues from where you would be quickly accessing it whenever you need it.
Start Saving:
Do not spend every penny that you earn, get in the habit of saving. Remember you won’t be making money forever, so start saving up now for your future goals like children education, retirement plans, etc. If your household is a dual income house, then try and live off only on one income. The other income can be used for savings and investments towards future goals.
Get an Insurance cover:
Also Read: Why should you buy an Insurance?
Life is unpredictable, you never know what life will throw at you, and so you must have adequate insurance coverage.
If you are dependent on one person’s income, make sure that the earning member has taken term insurance or life insurance. Also, all family members must have health insurance. Health issues can strike anybody, and they can cause a massive dent in your financial security.
Share your Financial Information With your family:
There is no use of setting up emergency funds and savings if your family is unable to use or cannot access the funds. In Indian families, many times husband does financial planning, and the wife is entirely unaware of the situation. But, in case of the untimely death of the husband, the wife is often left in lurch and relatives usually, take advantage of wife precarious situation.
Both partners should be involved in money-making decisions. In case of a severe injury, illness, separation, disability, or death, the healthy spouse should be able to do money management. Get together as a couple and plan your financial goals together. Your partner should not remain in the dark about your investments and finances.
If you are single, you might want to share your crucial financial information in case you are stuck with disabling illness or injury.
An emergency can strike at any time, it is essential that you stay calm and handle the precarious situation with a calm attitude. Having an emergency fund might not offer much solace when disaster strike but it does offer a little comfort and cushion in times of need.