1 in 3 people will experience a financial emergency at some point in their life. Most people do not recover and they end being another sad statistic. You do not have to be counted among these people. The thought of being affected by a major negative event in your life that could ultimately affect your finances; for instance, a job loss or an illness will have many people sacrifice their good night’s sleep trying to figure out the best ways to avert these crises. But what if you are prepared to take on anything that comes your way? The prospects of disruption become less threatening if you are well prepared. To help you with that, the Equity Movement Enterprise has prepared 4 steps to follow on how to deal with a disruption, such as this Pandemic.
Anyone can be taken by surprise! Even the most careful planner will be taken by surprise with an event that they hadn’t planned for. One of the best ways to handle a financial emergency is to always be prepared and planning for the worst. I am not saying that you should be looking into the future, always expecting the worst, but, practicing a little vigilance and caution will pay off. Build an emergency fund that will be used to cover unexpected financial emergencies should they arise. In addition to that, it is important to have easily accessible funds, specifically liquid cash just in case you need it in a hurry.
Additionally, health insurance is one of the best ways to plan for these unexpected financial emergencies. Not just that, get insurance for your car, and also your life. Health insurance will reduce the amount that you will actually spend out of your pocket to cover the health crisis, so is the car and also life insurance. On the other hand, auto insurance and home insurance will help guard against fires, damage, accidents, or natural disasters.
And while all these will help, it is important recognizing that you cannot plan for everything, but having a contingency plan in place will help you rest easy. In addition, once you experience a financial emergency, it is important to reassess your current plan and make changes where necessary.
Max out your liquid savings
Any cash accounts, money market accounts, and all the certificates of deposit (CDs), all the short-term government investments need to be maxed out. These will help you during a crisis. These are the resources to turn to first during a crisis because their values will not fluctuate with the market conditions as compared to the stocks, index funds or Exchange-traded funds.
With liquid savings vehicles, you can easily take out your money without incurring any financial loss. In addition, liquid savings will not be charged with a penalty for early withdrawals or taxes as in the case with the retirement accounts. Therefore it is advisable to have at least some months’ worth of savings to begin investing in high-risk investments such as stocks. But how much you need to save as liquid cash before investing in high-risk ventures depends on your financial situation and your risk tolerance.
Do not just invest for the sake of it! For instance, if you have a mortgage payment that you must pay, you may consider having more saved up as liquid cash before investing in high-risk commodities. Having a three-month cushion is considered the bare minimum, but you may decide to have 6 months or even a year’s worth of savings.
Minimize your monthly expenses
Anything that is not necessarily cut it! You may not start doing it now but you should plan on doing it eventually. The goal is to cut your recurring monthly expenses to as low as they can possibly get, this way, you will have less difficulty paying your bills when in case of a financial emergency.
To help you plan and filter out what you do not need is a budget. A budget will help you spotlight areas where you may be spending more than necessary and cutting them off. In addition, you will see the areas where you are overspending or overindulging and with this, control your spending.
Maybe you are in the habit of leaving lights on in the rooms that you are not actually using, this way, you may be able to trim your utility bills among many other things. Maybe the insurance you have is a little expensive for you, start shopping around for lower insurance rate companies. This needs to be a proactive process where you are constantly looking for areas that you need to cut down your expenses.
Explore extra sources of income
If you find yourself straining as a result of a single source of income, you need to find other income streams or assistance programs that might help. Do not just settle with what you have, be extra and try to find any side hustle that you can do to raise your monthly incomes. Suppose you are out of a job mainly because of this pandemic, try to see if you are eligible for the unemployment benefits. However, these benefits do take some time to reach you, which means, you need to find a job.
Cultivate the habit of doing extra to create another stream of income. If you are good with something, look for ways to turn it into a money-making venture. Learn a skill that will be in demand in the future. This will make you a highly attractive candidate when it comes to applying for jobs.
Life is unpredictable, but that doesn’t mean that you are out of control. There are so many things that you can do to stave off disaster. It is better to be prepared every time. Being cautious will not hurt you!