Financial emergencies are sometimes unavoidable. It is caused by several reasons such as a job loss, a failed business, an investment that went sour, illnesses and diseases, a house burned down, crimes such as burglary, and even emergency house repairs. The list may seem endless. Such emergencies can further pull people down the financial drain but it can be avoided in different ways.
Since emergencies are unexpected and you’ll never know when and how will it happen, being safe is always better than being sorry. Prevention is always better than cure thus the best thing to do in dealing with such emergencies is anticipating it before it happens. Though you will never know when will it happen, there is one thing that is certain, emergencies sure will happen thus you should be ready for it. Here are some ways on how to prepare yourself and your pockets before the emergency happens.
1.) Invest in healthcare. Getting sick is very costly and nobody lives in this world without getting sick. In fact, getting sick is one of the most common causes of financial failures. Many people pulled their investments out or sold their properties in order just to pay the bills. Worse, some or maybe most resort to debt. Having a healthcare plan will save you from financial disasters when either you or your loved ones get sick. Healthcare companies will shoulder a huge part of you hospital expenses in exchange for a reasonable amount called the premium which is to be paid on a regular basis.
2.) Invest in insurance. This is optional but still, being safe is better than being sorry. You can never predict what will happen tomorrow, the next week, next month, or next year thus you may still find having an insurance a need. Insurance protects your income generating capacity and will provide your family, loved ones, and dependents financial support in case your income generating capacity is gone. Unlike healthcare, insurance is only applicable to the bread winner of the family. If there is no income, what is there to protect?
3.) Establish and solidify emergency fund. As the name suggests, emergency fund is for emergency. If you have an emergency fund, it will prevent you from panicking when there is an emergency. Save at least 3 years of your annual income and diversify it in different banks or places. Just make sure that such funds are easily and readily accessible when the need arises. Emergency funds are not investments or savings, they serve as a ready fund in case of emergency. Don’t use it to spend on vacation or paying the bills not unless it is really necessary.
However, there will always be time wherein either you still fall short despite of your emergency fund and healthcare or simply haven’t done anything to prevent such fall. Take note that emergencies happen in an instant and you can’t bargain with it so you’re left with no choice but to face it. Here are some thing that you must do.
1.) Don’t panic and evaluate the situation. Look at the severity of the emergency first. There are some emergencies that may require longer periods of time to discern and plan such as loss of job or a failed business but there are some that needs immediate attention such as health problems. For things that may require a longer span of time, forget about it for the moment and start thinking once you’re relaxed. For emergencies that need immediate action, contact your family and friends and people who are closest to you. This is the easiest and most practical way to seek help. If you’ve got some credit cards, this is a time that it may come in handy. But only do so in real emergencies.
2.) Adjust budget plan. If you’re short, you are going to take some from your regular budget. In that case, adjust your budget immediately before you lose cash quick. By this time, the emergency is the priority thus put it first on the list. Eliminate things that can wait such as wants or pick alternatives.
3.) Talk to lenders. If the amount that people close to you aren’t enough, it might be the right time to talk to lenders. If you have a good credit rating, you may find it easy to borrow money. However, if you’ve got a bad credit rating, borrowing money might be a little challenging. However, assure the lenders that you will pay off the money in time and draft terms with them. Lenders aren’t hard to talk to especially if it is backed by a legal document. Also take note that they are humans as well and would certainly understand what emergencies are. But again, be sure that it is a real emergency and not something that you can afford to set aside for a while. If things really get tough, you can make your property as a collateral but be sure to pay it in time or else you’ll lose it.
As soon as everything is cleared and settled, start on building your financial foundation by doing the things that you must do in order to make yourself ready during an emergency. An emergency doesn’t come only once in your life, there will be numerous and if you don’t learn your lessons the first time, you’ll be having the same troubles over and over again. Worse, if the emergency that comes next is a very hard one and it may push you down and make you broke. As the saying goes, prevention is always better than cure so plan now while it is still easy.