Especially when you’re young and healthy, it’s hard to believe there may ever come a time when you don’t have the full and immediate use of your wits, will, body, or current resources, but life is full of unexpected surprises, and not all of them are welcome.
Whether you lose your job down the road, suffer a debilitating accident, find yourself caring long-term for an aging parent, or otherwise face an unexpected hardship, how well you are prepared to deal with that hardship may very well determine whether or not you’re able to bounce back from it.
From the emotional and physical challenges to the financial and social wear and tear these unexpected difficulties may take on you, being well-prepared can make a vast amount of difference. Here are some time-tested ways to prepare for unexpected financial setbacks that can happen to almost anyone.
Carry More Car Insurance Than the Bare Minimum
When it comes to car insurance, most of us carry little more than the bare minimum, and while no more is legally required of you, should you be involved in an accident, that bare minimum won’t provide for any repairs to your vehicle. Because of this reality, if you can fit it into your monthly budget, you should consider opting for additional coverage. While you may be able to recover money in the event that an accident is another driver’s fault — look into Claims Direct if you need to start a claim — if the fault is yours, having a little extra insurance will keep you in a working vehicle and protect your investment in it.
Get Out of Debt
Most people believe they’re managing their debt well so long as they can keep making the minimum monthly payments, and while, technically, it’s true that you’re staying on top of it, if you suffer a financial setback like redundancy or extended illness, that debt can balloon out of control and be an added financial burden. So, while you’re healthy and whole, get yourself out of debt. Pay off high-interest credit cards first, and then move on to lower-interest debts like school loans and car payments.
Have Savings You Can Easily Liquidate
If your money is all tied up in real estate or annuities, it can be difficult to keep paying bills if a hardship ensues. To that end, make sure you have savings in cash or a way to liquidate stocks or bonds easily should you fall upon hard times. You don’t want to have to figure out how to sell a piece of property that’s been in your family for years just because you didn’t keep a few thousand pounds on hand.
Develop and Keep Good Credit
Good credit can be your best friend in the event of a financial setback, which is why it’s important to develop it and keep it over the course of your lifetime. If you’ve had a spotty credit history in the past, set to making it right by always paying bills on time. You can also build up your credit by signing up for a credit card and using it for a year or so. Just make sure you always pay it off each month, so you don’t end up paying high interest fees.
Diversify Your Investments
Don’t put all your eggs in one basket is always a good investment strategy, and when it comes to a time when everything falls apart, it may mean the difference between squeaking by unscathed and spending years in the poorhouse. Diversify your investments so that even if the market takes a dive in some industries and parts of the world, you can still earn some money.
Cut Back Unnecessary Spending
Most of us adapt to our paychecks by living just at or outside our means, which leaves little to no wiggle room for a setback. Take a good, hard look at how you spend your money over the course of a month, and set about cutting unnecessary spending. From eating out too much to taking frequent vacations, dial back your spending until you are living below your means. That way, if a financial setback does occur, you’ve already put some financial practices in place that will help you weather the storm more successfully.
No one wants to anticipate even a small disaster visiting them, but being prepared for a financial setback is a wise thing to do. From paying off debt to diversifying your investments, follow these tips, and when your money tree quits bearing fruit for a while, you’ll be more likely to survive the famine.