No matter
how old you get, it’s not easy to prepare for emergencies. From medical costs
to home repairs, unforeseen spending can creep up on you when you least expect
it. But that doesn’t mean that you give up all hope of battling these
emergencies head-on. With a few tips here and some suggestions there, you can
be ready to handle whatever life throws your way. To help you achieve this
goal, here are essential emergency planning practices to become financially
stable.
Adopt the Habit of Saving Money
Let’s
face it: Navigating the world of money is easier said than done. But
when you want to save some money for a rainy day, no amount is too small. Even
when you can only throw together a few bucks for savings every week, they add
up to a decent amount in a few months. That is why, when you assume that the
funds you can save will be next to nothing, it does you a world of benefit to think
again.
Look Into Insurance
When you
think about preparing for emergencies, the idea of getting insurance
immediately springs to mind. From body shop estimate software to on-site investigations,
insurers can use a lot of ways to process your claims, but they mostly approve
them in the end. With several types of insurance, like auto insurance and
homeowners insurance, you can easily fall back on a safety net in events that
go beyond medical emergencies. This works wonders for better financial
planning.
Pay Yourself First
The pay-yourself-first
philosophy is not that hard to understand. What it means is to put aside some
money for your savings and retirement funds as soon as you get paid. From
there, you can cover your living expenses with the amount that remains in your
account. You can use an online bank account to put this amount aside. Or even
better, you can try investing it in some safe yet profitable assets that may
grow over time.
Build an Emergency Fund
While
there are several strategies to achieve financial freedom, building
an emergency fund often ranks at the top. Why, you ask? It’s because this
strategy is all about building savings that rack up to 3-6 months of your usual
household expenses. This way, emergency funds can help you in events like
getting fired from your job or losing earnings due to medical leave. With that,
emergency funds can also let you cover out-of-pocket repairs without waiting
for your next paycheck.
Put Together a Cash Cushion
While the
name can be a bit misleading, building a cash cushion is different from using cash envelopes to keep track of your finances.
It is also unlike an emergency fund, where you need to save an amount that
equals 3-6 months of household spending. Instead, a cash cushion is an amount
less than $1,000 that you keep in your bank account to save on overdraft fees
and cover small emergencies like phone repairs.
Put Some Money Into Investments
Even when
you realize the differences between checking and savings accounts,
your work to learn financial management is far from done. You also need to know
what investment accounts and assets can do for you and how you can benefit from
them. With various options like stocks, mutual funds, and retirement accounts,
you can take your pick of the litter to grow your wealth. But make sure that
you start with a low-risk investment to avoid losing funds from the start.
Use Precise Budgeting Techniques
All this
talk of savings and investments can be enough to overwhelm you. But if you turn
to budgeting techniques like the cash envelopes we talked about or a money
journal to write up your spending, you can get a firm grasp on these
suggestions before you even know it. This makes it important for you to try out
different budgeting practices and see which one suits your approach to money
and spending habits the most.
With
these tips, the otherwise stressful road to emergency planning gets much easier
to breeze through. This can help you reach financial freedom in the long run.
