The current times are quite uncertain and we can never know when we will require emergency funds. It’s very important no matter whether it’s a pandemic, illness in your family, or family crisis.
There has been no better time than now to understand that you need to give a good amount of attention to emergency funds while planning your personal finances.
Including them will make sure that your expenses will be reduced in case of an emergency and you will not take much stress because you know that you have your emergency funds in place.
People who didn’t have any emergency funds in their personal finances planning have faced tremendous financial hardships during the COVID-19 pandemic as they have lost their jobs or their business have been shut down and they are broke.
In contrast, people who had prepared well were in a strong position even in these tough times.
Let’s look at some ways to emergency-proof your finances so that you are in a better position whenever you face any hardships:
The common mistake people make, especially youngsters are that they think that they are too young to care about all this stuff. But your age doesn’t matter as anyone can face an emergency at any phase in their life.
Searching and learning about various insurance policies can be very beneficial and the sooner you start the better you will be prepared for the future.
Many people save their money by spending less and saving for the necessities. But it is very important to include a portion of all your money in the emergency funds.
Many financial experts suggest that you should set aside at least 3 to 6 months’ of living expenses in an emergency fund.
You can alter by saving more than this too depending on your financial situation. Once you set aside money for an emergency, it’s quite important to stay disciplined and never use this money on anything except for emergencies.
Insurance forms a very critical part of your emergency fund. Never ignore insurance as they will be very helpful and will save you thousands or lakhs in case of an emergency.
There is an insurance policy available for every category; car, health, property, etc. You have a variety of options in choosing the insurance policies.
Make sure to do proper research, see which one suits you the best, and read its terms and conditions very carefully.
A good insurance policy can save you a lot of bucks but a bad policy would not help you much. Keep contacting your insurance providers to see various deals available so that you don’t miss any when they come.
If you can’t set aside emergency funds due to any reason or use up all the cash that you had set aside for emergency funds, then you will need to raise money by debt instruments like taking loans.
Some tips to keep in mind to raise money are:
Having multiple streams of income is becoming more of a necessity as no single stream of income is safe these days.
Millions of jobs are lost and many businesses are shut down. If you only depend on this for your income, you are only one step away from disaster.
Having multiple income streams such as stocks, bonds, real estate, etc. can help you be diversified and be in a better financial position even when you are stuck with an emergency.
This is another reason why making a proper financial plan and managing your personal finances is very crucial as it builds discipline and saves you in an emergency.
Start learning about various income streams as soon as you can and be well prepared.
Having good health insurance is important but at the same time, it is quite necessary that you have a medical power of attorney.
It means that power is given to one person by the legal authority to act for or on behalf of the person who gives him/her the medical power of attorney.
Another thing to note is that if you are over 18 years, you need to give written permission for someone else to receive your medical information – even if you are a parent. Make sure to consider these things.
Everyone should make a will whether you are old or are very far from being old. A will is simply a legal document that is helpful for you to complete your wish. If you die without making any will, your wishes may not be carried out.
Any emergency situation won’t be comfortable for you and will be difficult but not having any emergency planning will make the matter worse.
You can never predict when you will face an emergency and thus it’s best to be ready for it in the best way possible whenever it occurs.
Start focusing on your personal finances as early as you can so that you can enjoy life and make the most of it instead of spending most of the time being stressed financially.