5 Ways to Prepare for a Financial Emergency

ways to prepare for a financial emergency

Getting access to funds whenever you need one especially in an urgent mode can be tricky for most, but there are proven ways to stay ahead of your financial spending. 

1. Avoid impulse buying.

Everyone makes purchases every now and then. Needs arise and so do wants, but if you find yourself in the habit of buying items of short-lived value then you might want to consider cutting down on such expenses. Reducing excessive and unnecessary expenses could save you a fortune. Shut off those appealing ads and coupons if you do not need it. Ask yourself, do you really need that trending flowering dress? If not, then ignore it and tuck that money in some safe place (for example, a piggy bank) however little it may be. 
Be reasonable with your spending and think things through before you hit the "Purchase" button. Believe this, it is going to help in the long run.

2. Create an Emergency Fund

By saving money in an emergency fund, with an optimum monetary value of between three to six months worth of living expenses, you will be increasing your chances of living debt free by actually spending from reserves instead of piling up debt charges from credit cards as you go on living. Financial experts put a number on the safest amount you should save -at six months for unexpected financial shortfalls.

“Do not save what is left after spending; instead spend what is left after saving.” ― Warren Buffett
By all means necessary save a certain portion of you income and safely store it in a no-risk account, such as a savings account or money market account as the case may be.

You may feel like investing your savings for more promising returns but you wouldn't want to risk losing your savings in the end, and you will also need to be able to access it easily.

3. Practice Living Below Your Means

Most people would find this unsettling and a little bit of asking too much, but if you successfully practice the earlier steps and fall short of this, you can be sure that it will not result to any meaningful progress in your goal of pursuing financial security, now would it!

For clarity sake, it is a whole lot simpler and less worrisome to live a lifestyle commensurate with your income level, while on the other end it can be more difficult, troubling and agitating to keep up with a lifestyle beyond your means. It will hurt your savings. 

Look out for great items you truly need, and research those retailing at low prices. Don't just quick jump into making a purchase, but do your best to practice this as often as your time can allow. 

Well! who says you can't be classy and frugal at the same time.

4. Get Insurance Coverage

Getting an insurance is perfect for facing the unpredictability of life in the sense of health care crisis, auto crashes and the rest.

Here's a quote from Ariel Ward, a financial adviser with Abacus Wealth Partners:
“Everyone should have disability insurance for income replacement, and couples who are dependent on one another’s income should have a term life insurance policy with each other named as the insured,” 

Disability insurance is of general importance to every one and can be gotten through your employer, but anyway if that's not the case a low-price plan should be good enough to pick up.

This will go a long way in assisting you, should you or your dearest ones ever become unable to work. The peace of mind you will get from a disability insurance is worth the price.

Life insurance is nice to get coverage for but if you do not need one, you can get a coverage for an incapacitated companion, and also if you have an outstanding debt co-signed with a family member.

5. Inform close ones of personal financial information 

A partner, family relative and a trusted close friend can be of major help in dire times when an account holder might be unable to use his/her personal credit facilities probably due to physiological or cognitive inabilities, including death caused by accidents or sickness to mention but a few. Making such confidential financial information privy to trusted individuals such as your spouse, friend or relative is a better means of clearing hassles in the instance of a financial emergency.

If you have a partner you should develop the habit of budgeting together as a couple. Discuss money issues with your partner about short- and long-term goals. Come up with ways you’ll both split shared expenses.

You should not forget to practice caution in disclosing certain financial information to a third party, and if it is preferred between you and your spouse to maintain separate bank accounts then you should both go for it. The point is to keep your partner knowledgeable of your finances for a proactive handling of any future emergency and luckily enough, to be a life saver if any unforeseen situation demands it.

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