To be prepared for a Financial Emergency is a subject that is not very well discussed but is extremely important pertaining to financial success and financial survival as well. Knowing what it means to ‘Be Prepared’ and how to think forward to all the possibilities you can come up with is a very useful skill and trait and is one that, in my opinion, should definitely be applied to financial preparation. While you cannot plan for when a Financial emergency will happen to your household you can very much be ready for when one does. In this blog I will discuss some highly suggested pro actions of prepping financially as well as linking to resources.
What is a Financial Emergency?
Simply put, a financial emergency is an unexpected expense that, if not dealt with promptly, can have immediate and/or serious consequences. It can be things like a medical emergency that is unexpected or your car breaking down on the way to work. The basement of your home flooding or a fire that burns half or all of your home. Preventative Maintenance of any sort to keep your life in working order.
Unexpected job loss, like many have been experiencing with the Coronavirus pandemic or even a decrease in wages that might set you back on your goals and will require some sort of mitigation.
Something you can do to prevent your situation from getting worse in the event of a fire or flood is to gather up all your financial documents into one spot up off the floor, to prevent water damage and to be gathered quickly in a fire. You could put your documents in a filing cabinet or high on a shelf as a suggestion.
Having your important documents safe and accessible is of supreme importance when rebuilding your life after a life-changing disaster.
Financial Emergency preparation in this current economy
Many people especially in America today, don’t have an emergency savings account. They are living paycheck to paycheck and it is quite unfortunate that this is the way of the world today.
One of the most important lessons anyone can learn is to not live beyond your income and avoid unnecessary debt like expensive car loans and especially payday or signature loans. They are purely a trap. Keep your expenses as low as you can.
Fortunately there are many ways to free up budget space which I will get into later in this blog. Self control and discipline is a major key to financial preparation and especially financial success in general.
In addition to having an emergency savings of some sort, health and life insurance are a wise investment should something happen to the life or health of anyone in your household.
The emergency savings
Have money in a ‘stash spot’ or even a savings account and act like it doesn’t exist. Have multiple savings accounts for multiple different purposes. By having the ‘Emergency Savings account’ you will have that buffer in case something drastic were to happen to you or a family member or cover living expenses if a job loss were to occur.
Acting like it doesn’t exist is a good habit to get into because it will keep you from spending it. It can be borrowed from but that is something I don’t suggest you do unless you have a plan to pay it back very quickly.
Having a side hustle
A side hustle is a source or form of income other than your regular career or job. Having a side hustle can be anything from delivering pizza in the evenings to running a website on your free time. Something that brings in a passive income is usually the suggested idea, something that you can build on. Buy/restore/sell items like furniture on Facebook market or local classifieds is another side hustle.
Something I enjoy doing is running a blogging website to try to help people. A good place to learn how to do that is Wealthy Affiliate. They have Top notch training and all the web tools you will need as well as access to professionals in the industry who are willing to help you be successful. It was a good decision for me and I suggest you check it out if your so inclined to do something like it.
Investing extra cash after living expenses can be a good side hustle if you are willing to do the research. I will not give investment advice here in this blog because I am not an investment adviser but it is simply brought to your attention as a side hustle that many people have and are quite good at it with hard work and research.
Smart budgeting
Different people have different methods of budgeting. Some people don’t budget at all, they just keep it all in their head and are very successful at it!
In my case I wouldn’t survive very long just trying to do it in my head. The way we do it in my home to stay organized is multiple share savings all inside one account and because we get paid weekly, we have all our weekly expenses written down in a notepad. We add up all our monthly expenses, divide them by four (weekly paychecks) and require ourselves to set aside that weekly expense amount into another savings we have labeled ‘Bills’.
There is another method called ‘The 50-30-20’. Basically 50% of your monthly income goes towards expenses, 30% goes towards wants and 20% goes into savings. People have done this and still do to this day by keeping expenses low to hit that 50% mark and are very successful at it.
The United Way has excellent financial education resources that are mostly free. If your struggling with a budget or have never implemented a budget before, they can help you by giving you the proper advice and showing you the format for budgeting.
There are many more programs out there like 360degrees, Family Education and Financial Literacy.
To free up money from your budget, cut out the unnecessary things like fast food, gadgets and impulse bought items. You can also shop around for better deals and services you are subscribed to for instance car insurance or internet services.
The need for emergency cash and smart budgeting
With the value of the U.S. dollar declining and wages not organically growing, the need for extra income has never been stressed more. Economic recessions often happen now and side hustles are a good way of creating that extra income to stash away for a stormy day or even to help supplement and fall back on when your main source of income has dried up. Here is a resource from Ready.gov about financial preparedness. You can check that out for other resources linked in that article. Go ahead, go get financially educated and prepared!
I hope this blog was helpful and if you have any questions, comments or input please feel free to do so in the comments below because it helps me to bring you the best content I can.
Thanks
