Be financially prepared for emergencies. If you’ve heard it once, you’ve heard it a million times. OK, not a million, but you get the idea.
A little over a year ago, my uncle (who was only 53) — a healthy, strong, hard-working man — developed an infection that left him paralyzed. As the sole provider in the household (which includes two teenagers and their mother), this was financially devastating. And it happened in a matter of days.
I admit, I am not financially prepared for emergencies. I regret that. Preparing for an emergency means sacrificing, tightening your belt, and planning ahead. All things I’m not exactly great at. But if I found myself in a major emergency, like my uncle’s family did last year, what would I do? I’d be in big trouble. But there are steps you can take to get yourself financially prepared for emergencies, should something traumatic and unexpected occur.
- Build up (or start!) your “rainy day fund.” It’s recommended that people have three to six months’ worth of living expenses saved up, should an emergency arise. And, in times of economic uncertainty (uh, yeah, this might be one of those times, unfortunately), it’s recommended that you have six to 12 months of living expenses squirreled away. Don’t freak out if you don’t have savings…you can start now. Add to it when you can and whatever you can. And when you get a bonus or a tax refund, you can add a nice lump sum to build it up then. The important thing to do is start saving, if you haven’t already. This is one of the main ways that you become financially prepared for emergencies.
- Get insurance. This is so important! Do your research and talk with an agent. Figure out what you need for you and your family. Life insurance, disability insurance, and long-term care (nursing home care, home health aides, etc.). Sure, you might never need it. But if you do need it, and don’t have it…it’s gonna be too late to get it and then what will you do? You’ll be in quite a bind, that’s for sure. I speak from experience. That’s a major way to help yourself in becoming financially prepared for emergencies.
- DON’T WAIT to make your estate plans. When you need them, it’s kinda late in the game. You need a will (so the state doesn’t dictate what happens to your property and your children!), a living will (which appoints a person to make medical decisions on your behalf if you are unable), and a power of attorney and health care proxy (which allows another individual to make financial, legal, and medical decisions on your behalf if you are unable). Review these documents regularly as circumstances change, such as changing jobs, having children, getting married, or getting divorced. You want everything to be accurate so that it reflects your wishes should an emergency arise.
Be prepared for all kinds of emergencies. It will make a huge difference, if that day ever comes, which I hope it never does. While being financially prepared for emergencies is just one step in the plan — it’s a huge one.
This article was written using Genworth Financial Educational Resources, who sponsored this post.