How to Prepare Financially for the Unexpected
Making your money work no matter what happens takes a lot of planning. In many ways, you need to be prepared for the unexpected and be ready to take on financial burdens you didn’t really want.
While you might factor in many expensive life events from a young age, it is also important to be ready for the unfortunate events like potential accidents, redundancy or economic hardship. For all that it is never particularly fun to think about this kind of thing, preparation is key.
Getting the Right Advice
Knowing who to talk to and who can give you the best advice is crucial for your financial health. You may not realise that you are entitled to compensation before you speak to an injury lawyer, for example, or you may be persuaded to put your savings into a bad scheme if you don’t double check with a trusted financial advisor first.
Fund and money management doesn’t have to be complicated but if you are still learning how best to manage your finances then asking someone else is always a good idea. Plenty of professional advisors will happily help you set up accounts and make a financial plan. Sites like Investopedia are also great.
Building Up Your Savings
The best way to prepare for any financial uncertainty is to plan ahead. In essence, you should save up according to the perceived risk and the possible cost but in reality, you should simply be saving as much as you can without having a massive impact on your lifestyle.
Everyone should have an emergency fund of some kind. How much you choose to put in your emergency fund will probably not be the same as someone else. If you are in a job with little security, you should probably aim for a few months wages in savings to keep you afloat. On the other hand, if you have assets that would be easy to sell (like business shares) you might choose to view that as part of your emergency fund.
Turn Saving into a Lifestyle Choice
Even once you have an emergency fund, you should continue to save a sensible amount each month. For example, the 10% rule works quite well for most people but it won’t necessarily fit perfectly with your situation. This rule is usually used to build savings for retirement, but frankly, you can use it to save for anything.
Saving is definitely a lifestyle choice and the more you can do to automate your savings, the less painful it will be each month. In fact, you will be surprised by how quickly you get used to not having that money to spend, whether you choose to put money into your savings on a weekly or monthly basis.
No-one ever plans to have an accident or a financial dip but having the money in savings just in case is a big reassurance. That money will always come in useful for something and having it on hand is far better than getting into debt because you didn’t plan properly.