Building an emergency fund will help you get through any difficult financial times, be it a medical issue, a natural disaster, or any other personal emergency. But once you have recovered from a financial emergency, you will have to go through the painstaking task of rebuilding your emergency fund again. So, before you get started relax and have a proper plan in hand. Below you can find some of the financial emergencies that you may encounter in life and the steps that you can take to recover them.
Job loss is one of the most prevalent emergencies that almost everyone encounters. Losing a job can be a serious emergency that everyone should be well prepared for and plan accordingly. You should ensure you have enough cash in hand to deal with unemployment the consequences that you may face due to unemployment.
The reasons behind losing jobs may vary widely. But one simple plan to tackle the such issue is to have at least one month’s pay. You should have enough money so that you can cover the most immediate needs.
When a person is already in debt, marriage can further increase their financial emergency. Acting irresponsible with money can make it difficult for you to plan for an impending emergency. So, before you marry into debt, make a plan to pay down individual debt and create financial goals for the short and long term, which can include things such as paying off credit debt or building credit scores to get pre-approved for a house in the future.
Separating from your spouse can cost you more than partnering. Getting a divorce can also be a financial emergency. If there are children involved, you may have to provide child support money which shall be calculated by the state and will be generally based on factors like both incomes, the number of children involved, and custody. Calculate the amount of child support that will be needed to cover food, housing, clothes, school supplies, activities, and other expenses. Planning in general for such a financial emergency will protect you.
Keep the possibility of natural disaster in mind when you buy homeowner’s insurance or renter’s insurance, depending on how common tornadoes, earthquakes, or floods are in your area. Whether you are buying a house or renting an apartment, planning for escape will never hurt if you live in an area that has chances to suffer disasters often. In addition to creating an underground shelter, you should also shelter your finances by insuring them.
Anyone who takes calculated financial risks or never bothers about saving and spends too much is prone to get bankrupt. It can be one of the biggest financial emergencies in your life. To recover from such an emergency make sure if your credit card allows you to charge up to $5,000, keep a balance of at least $2,000. The amount of debt that you carry will always be considered by the lenders and it is suggested that your debt-to-credit limit percentage should be 30 percent or less. When facing a financial emergency of bankruptcy, you should remember that you cannot write off student loan debt.
After working hard for so many years, everyone intends to retire so they can enjoy the money they have earned. But the amount of money you earn may not be enough to save for retirement. If you are in a position where you cannot count on retirement or a pension, you should consult a financial adviser. Consider creating a plan to invest that will help you to protect your plan to retire.
Death Of A Spouse
The death of a spouse is purely catastrophic. You will not only suffer emotionally but financially as well. To recover from such an emergency you will have to plan for death in a similar way you would plan for divorce. So, save money in an emergency or trust fund. Besides, you can utilize life insurance to protect against financial devastation.
No matter what financial emergency you are facing, try to look into the future and recognize the potential for disaster. The best way to deal with all your financial emergencies is to insure, save, and most importantly have a plan to overcome them.