Are you really prepared?
September is National Preparedness month and an important component is being financially prepared for all of the life events that can come your way, expected or unexpectedly. It starts with understanding how different life events might impact your financial situation. Being prepared could be easier than you imagine.
What are some of the events we all need to prepare for?
These life events are varied, examples include: buying your first home, having a baby, loss of a job, medical expense, dealing with a natural disaster or even taking care of your parents.
What steps should we take to prepare for buying a home?
The basic steps should be: build excellent credit, save for a down payment, have a budget so you know how much house you can afford, understand all of the costs of homeownership and finally, get a team of professionals including a loan officer and a realtor.
What is the biggest financial hardship that new homeowners tend to experience?
Without question, the biggest issue for new homeowners is that they underestimate the costs of owning a home from the cost of utilities, annual maintenance, and even the occasional repairs that all homes require on a regular basis. If they have stretched the budget to buy the home, they have little room to cover these expenses creating a strain on the budget and impacting other important financial goals.
What are important steps in preparing to have children?
It is always important to start with the impact on the household income - will one parent stay home and work part time? If this is the case, start well in advance of the baby coming to make important financial changes to your budget and practice living that way for at least six months. Also it is important to adjust other budget expenses due to having children.
What are some of those expenses that new parents tend to miss?
Probably the most common is to not increasing their food, clothing, medical and cost of insurance expenses. This can be a shocking revelation to new parent’s regarding how much the impact children will have on their monthly budget. And this is before any savings for college is considered. Plus there are other costs including babysitting on the weekends, activities and added expense when traveling.
What’s is the best way to prepare for life’s unexpected events?
There are two important ways to prepare for some of life’s curveballs. First is building an emergency fund, having a ready reserve for major expenses can really help. Secondly, not overextending on credit and living well within your means also helps because you emergency fund won’t have to be as large to help you make it through the tough times. Part of this includes having proper insurance coverage including home, auto, renters, life and disability insurance as appropriate.
How can we prepare for dealing with our parents if needed?
The most important component is having an open dialogue with them and making sure they are financially prepared for whatever comes. It may be difficult but children should understand their parent’s financial situation and identify any gaps. Sometimes this awareness can lead to changes that can avoid problems in the future.