How to Prepare for Financial Challenges
Financial concerns have the potential to keep us awake at night. Unfortunately, most of us wait until a crisis is upon us before we get busy. You’ll feel a lot better if you prepare now. You’ll sleep better at night knowing that you have plans in place for contingencies.
Begin using these strategies now – before a financial challenge arises – and you’ll lessen its negative impact on your life:
1. Have sufficient savings. Set aside enough money in things like checking and savings accounts, money market accounts, and short-term certificates of deposit to cover 3-6 months of living expenses. You should have this in place before you begin investing money elsewhere.
Some benefits of these accounts are that they don't fluctuate with market conditions, and there is no tax penalty for withdrawing the money, unlike retirement accounts.
2. Know your numbers. If you don't know what all your expenses are – things like your regular bills, gas, groceries, and those non-monthly or irregular charges like HOA fees, health insurance deductible, out-of-pocket medical/dental/eyecare, pet care, car inspection, etc., there's no time like the present to get started. The first step to making a real change is to measure where you’re at right now.
Knowing what your expenses are will provide you with the information you really need to free up funds for saving.
3. Consider how you would reduce your monthly expenses. You don’t have to make changes now but look at your monthly bills and see where you could alter your spending if you needed to. You’ll feel most financially secure with a plan already in place.
4. Automate your bill payments. Set up all your bills on autopay. Don’t waste money every month on late fees and other penalties.
Make a list of all your bills and their due dates. Check the bills against when you receive your income, and then call each vendor to find out how to get your account set up on autopay.
5. Reduce your credit card debt. Credit card interest can really eat into the income you have available to save and spend every month. If you have your emergency savings taken care of, this is now the best place to put any extra money after your expenses have been taken care of.
6. Earn some extra cash. Sell some of the stuff in the garage, attic, or basement that you don't really need and use the extra cash to build up your savings or pay off credit card debt.
Establish a second income source. This is especially handy if you happen to lose the first.
7. Review your insurance coverage. Are you getting the best deals? Shopping around and comparing policies is time well spent.
Don't wait until a financial challenge comes into your life, instead, begin your preparations now and avoid the stress.
Financial hiccups happen to everyone, but those who are ready for them are better able to get back on their feet quickly. Get started now and you'll sleep like a baby while others are up late worrying.