When it comes to finances and emergencies the best thing you can do for yourself is to be prepared. As you make goals, you should include contingency plans and always maintain an emergency fund. When life’s twists and turns arrive, you will be better able to enjoy the ride rather than fear the consequences.
1. Job Loss – the financial emergency we often encounter first
From our first fast food working days to the jobs we plan to continue throughout our careers, job loss is one of the most prevalent emergencies–and losing a job is an emergency everyone should plan for and plan accordingly. Even a 18-year-old working his or her first job should plan to become unemployed. The reasons people lose jobs vary widely, but a simple plan involves saving at least one month’s pay. Depending on the responsibilities the individual has at the time, saving more money may be necessary. It all comes down to planning to cover the most immediate needs because even when working your first job, you need to prepare to pay your bills if you lose the job.
2. Marriage – emergencies occur when combining debt
Believe it or not, marriage can be a financial emergency–especially if you marry into debt. You shouldn’t marry for money, but when you and your fiance (or fiancee) acted irresponsibly with money before you decided to partner for life, you need to plan for impending emergency. The best defense against marrying into debt is not to separate. Instead, make a plan to pay down individual debt and create goals for the short and long term.
3. Divorce – separation costs more than partnering
The last thing lovers want to think about when marrying is divorce, but this financial emergency is a startling reality for many couples. The best way to plan without hurting your partner’s feelings or giving strength to pessimistic thinking, is to take steps to maintain the relationship. In addition to “planning” for divorce, just planning in general for financial emergency will protect you against this one.
4. Retirement – will you have enough?
Most people who join the workforce intend to retire so they can actually enjoy the money they earned working hard at a career for so many years.
If you fit into a category in which you cannot count on retirement or a pension, make sure to consult a financial adviser and create a plan to investing that can help protect your plan to retire. People live longer now than they did in the past, so long-term-care insurance may be a wise investment to protect what savings you accumulate while working.
5. Death of a spouse – planning for the hard times
Topping the list of things no one wants to think about is losing one of the closest people to you in your entire life. Apart from a parent, who you expect to lose before you die, and a child, who you never hope to lose before you die, a spouse’s death is purely catastrophic. Not only do you suffer emotionally but also financially. You can plan for death in a similar fashion to planning for divorce, by saving money in an emergency or trust fund. You can also take out life insurance to protect against the financial devastation that comes if your spouse’s income provided the majority of household income on which you need to live.
6. Natural / Man-made Disasters
How common are riots, earthquakes or floods in your area? When you buy a house, car or even rent an apartment, keep the possibility of natural or man-made disasters in mind and buy homeowner’s insurance, car insurance or renter’s insurance.
Secure your assets by insuring them.
In all cases of financial emergency, looking into the future and recognizing the potential for disaster is possible. Insuring, saving, and most importantly, planning are your best calls to action in recovering from any financial emergency–now that you know what the big ones are.
This article was originally published in Life Hack.