Don’t be caught off guard by a major issue that can put a dent in your budget. Having an emergency budget and the associated skills to manage finances will both come in handy.
There are many ways to prepare for unexpected expenses, and below are just a few of them. Consider the following to be ready when that day comes.
Start an Emergency Fund
Everyone should have a savings account to which they regularly contribute. Even fifty dollars a month can add up to cover an unexpected cost like a plumbing repair or a new tire if one blows out on the road.
While many people have long-term savings accounts, a shorter-term liquid savings account provides added security and immediate access if needed for an unexpected expense. Avoid using the funds until they are truly needed for an unplanned expenditure.
Having an emergency fund will allow you to be ready for unexpected expenses that come up as life rolls on. Start one today and slowly add to it until you have a substantial amount to cover various expenses that might come up.
Making an emergency fund is a great idea for everyone.
One of the most common emergencies that can happen to anyone is a car accident. Even relatively minor collisions typically require a vehicle inspection and possible repairs as well as a medical evaluation for the driver and passengers.
All of these things cost money, and other expenses may develop in a serious traffic accident. Loss of income, medical copays and deductibles, and vehicle repairs could strain your regular income.
Consult an auto accident attorney to find out the expenses a victim would need to pay for until the accident claim is settled. A car accident is just one of many unexpected things that might come up.
You will have to cover more expenses than you originally planned for in such a situation.
Borrow From Yourself
You can also borrow funds from other financial resources, such ss a 401K or a stock portfolio. You will just need to maintain an adequate amount of money that can be borrowed without a significant penalty, especially if you plan to repay it.
A college fund or retirement savings could be tapped as well but be sure to replace those funds to keep the accounts going. A home equity credit line might also be available if your home has built up equity.
If you are eligible for this type of credit, you can repay it later when the crisis has been handled. This is a great idea for those that have flexible incomes. This can be an answer to unexpected expenses.
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Have a Backup Plan Ready
Because even the most careful plans sometimes fail, work out a backup plan to cover emergency costs that could develop unexpectedly. You could plan to sell a collector’s item or a special jewelry set, for example.
Consider your possessions to determine what could be sold and not strongly missed if necessary. Taking your old stuff to a pawn dealer can really be a drag, as they give you pennies on the dollar for the price of goods that you sell to them.
There is not really a way around this, other than to have the money you need available before having to start selling your stuff.
Don’t face an uncertain future unprepared. Set up a funding source now to plan for an abrupt situation that could have you scrambling for funds.
Image Credit: how to manage finances by twenty20.com
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