Do you have a emergency plan in place for natural disasters common to your area? Would you teach your children what to do in the event of a fire in your home? People understand the the importance of having a plan in place to deal with natural disasters yet fail to properly plan for a financial disaster. The current economy has brought this lack of planning to the forefront and many people are realizing they are not adequately prepared if faced with the loss of employment, disability, medical emergencies or other financial hardships that are bound to happen at some point in their lifetime.
Anticipate Financial Disasters
When disaster strikes it is too late to think about what you should have done. You can take the following steps today to be better prepared for what tomorrow may bring.
Develop an emergency budget– Prepare a budget to determine the minimum amount of income you need to survive a financial emergency as well as the minimum amount of expenses you would have to pay.
Review your insurance policies– Take the opportunity to review your policies and ensure you have adequate protection before you actually need the coverage. If you wait until a medical emergency happens it will likely be too late to make the necessary changes to provide the protection you need.
Find out if you qualify– Protect your credit during the good times to increase the changes of qualifying for a loan during difficult times. Incurring debt at any time is not recommended for your long term financial security however you may find yourself in a position where you need that money to survive. If the worst case scenario happens you will have the peace mind of knowing what options are available.
Save, save, save– The best way to prepare for a financial disaster is by having resources already available should you need them. Look at your current budget (develop one if you don’t already have a budget in place), cut unnecessary expenses and determine how much money you can put aside in an emergency fund. By building an emergency fund you will reduce the chances of having to borrow money in hard times and have the security of knowing that you are taking steps to protect yourself and your family in the event of an emergency.
Multiple sources of income– With unemployment on the rise, the fear of losing your primary income is a realistic concern for many families. Don’t wait until you are facing a layoff to consider additional streams of income. By generating outside sources of income you will reduce the damage to your finances should you lose your job.
Preparing for the future can make the difference between surviving a financial disaster or facing years of struggle trying to recover.
Trisha Wagner is a freelance writer for DepositAccounts.com where you can compare rates of deposit accounts from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and saving accounts.