iQuanti: Financial emergencies can happen anytime. Having a proper plan can help protect you from suffering a significant financial loss. A few things that should be a part of your emergency preparedness plan include having an emergency fund and having health and life insurance. Before you encounter a financial crisis, here are four things you should include in your financial emergency preparedness plan.
1. Emergency fund
An emergency fund is a specific amount of money you set aside to help cover you in the event of a financial emergency. Some examples of emergencies that can happen include getting laid off, missing work due to illness or injury, or unexpected car or home expenses. Your emergency fund can be used to supplement or replace your income if you're out of work for a period of time. It can take care of unexpected expenses and prevent you from going into debt. It's ideal to save up at least three to six months of income so you can continue to cover your essential costs until you find a new job.
Set a goal for how much you'll put into your emergency account each month. If you're living paycheck to paycheck, you can start with a small goal of saving 2% of your net income. Set up automatic recurring transfers to make it easier for you to make consistent contributions.
There may be times of the year you receive a higher amount of income than normal, such as getting a tax refund. It's a good idea to put the extra money into the emergency fund. Consider also setting up automatic notifications of how much money is currently in the emergency savings account. This can help you keep track of how much is in your emergency fund and motivate you to keep saving money as you watch it grow.
2. Health and life insurance
Different types of insurance can help protect you or your family from unexpected financial expenses. Health insurance is designed to pay for health or medical expenses. Depending on the type of insurance chosen, it may cover some or all of the costs of emergency care, routine care, and chronic illness treatment. Life insurance is an agreement where as long as premiums have been paid, the insurer will pay out a lump sum of money to a designated beneficiary if the policyholder dies. Other types of insurance that can protect you against financial emergencies include home insurance, renters insurance, and disability insurance.
3. Get physical copies of important documents
In today's digital age, important documents are being stored online more than ever before. But in the event of a natural disaster that may cut off power or internet, it's necessary to have physical copies of your documents stored. Get a printout of documents such as your bank account information, birth certificate, social security card, and insurance policies.
4. Document your valuables
If your home is ever damaged or destroyed, having a home inventory can make filing a claim with your home insurance company easier. Write down the serial numbers of major items and take photos of your possessions. Home insurance is designed to protect both the physical structure of your home and the belongings that are in it. Including all these things in your financial emergency preparedness plan will help keep you financially stable when an emergency happens.
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Original Source: 4 Things to Include in Your Financial Emergency Preparedness Plan