In the United States, nearly 33 percent of American families do not have any money saved up. This is a scary statistic since 6 out of 10 households face a financial crisis at least once a year. In fact, almost 50 percent would struggle to come up with $400 to help cover the emergency.
A financial emergency is unanticipated expenses and income loss. It could be medical treatment due to a pandemic, job loss due to an economic crisis, divorce, or property damage from a natural disaster.
It is impossible to know what will happen in the future. When faced with an unexpected financial crisis, it is easy to feel powerless and unprepared. Nothing is more stressful than experiencing a sudden shift in your financial status; after all, bills still need to be paid, food and clothes bought. However, there are certain things you can do to assist you in managing the situation and minimizing the negative effect on your finances.
Preparation is the first step. It is essential to have contingency plans in place and always to have an emergency fund.
During the Covid pandemic, millions of Americas lost their jobs or had pay cuts and had to rely on the government for financial help. While the amount did help with their costs, it was still insufficient to cover all their bills. One way to counter a loss of income is to save more money than necessary. You can do this by making a monthly budget. Without having a budget in place, you won't know how much money is coming or going each month. It can help you determine whether you live within or beyond your means.
In addition, it allows you to prioritize your requirements and remove anything unnecessary. For example, consider canceling your seldomly used landline phone or switching to a less expensive emergency-only coverage may help save you money. Similarly, find a credit card that offers a lower interest rate and transfer your existing balance onto it. You can pay off your debt faster and save money each month due to the lower interest charged.
Getting insurance is another way to prepare for an unplanned financial crisis. If you already have insurance in place, read the small print on all your plans to see what is not covered. This can help you prepare for so for some unwanted expenses.
For example, does your car insurance provide you with a rental car while your vehicle is in the garage for repairs? Depending on how long the repairs take, renting a car can be expensive, but it is unavoidable with the right policy cover.
It is also advisable to look around for the best insurance deal to help reduce your monthly insurance costs. Often lowering your coverage or switching carriers can help save money, but it shouldn't be to the point of having inadequate cover in place.
On the other hand, having good insurance may keep a problem from snowballing out of control. A disability insurance policy is essential if you have a severe sickness or accident that stops you from working, and an umbrella policy may fill up the gaps.
While reducing costs, you should also start an emergency fund for unexpected expenses. You should always have enough money saved up for a few months if you lose your job. Hence, you will not be forced to make tough decisions concerning essential requirements due to unanticipated costs.
