If you got in a car accident or lost your job, would you still be able to pay your bills? You might want to consider taking steps to prepare yourself for unforeseen events, so that everyone in your family stays safe and cared for.
To set yourself up for financial security in an emergency, start with these three steps:
- Step One: Get out of debt. If you owe a good deal, this step may take a few years to complete, but it is vital that you create a budget and start paying down your debt now. Imagine if you find yourself in an emergency, but have nothing but maxed out credit cards at your disposal! Once you have begun your debt repayment plan, you can start working on growing your emergency fund.
- Emergency Savings: If you are repaying debt, aim to set aside roughly a month’s worth of income. Saving any more than that might cost you accrued interest on your debts. Once you have paid off your debt, schedule automatic transfers into your emergency fund, with the goal of saving enough to cover six months’ income.
- Consider Insurance: If you’ve been saving up, whether for an emergency or retirement, it may be in your best interest to buy insurance. Otherwise, your hard work and discipline might be undone in an emergency! Consider at least buying health insurance, to reduce sudden, serious medical bills; disability insurance if you work in an environment where injury could deny you from your paycheck for a few months; and life insurance, which can protect and provide a college fund for your children.
While you won’t be able to create an emergency fund overnight, focusing on your financial well being will save you stress and hardship that could last years if met unprepared!