September is National Preparedness month and one component of being prepared is making sure your finances can withstand the unexpected life events that could happen. Being prepared could be easier than you imagine.
What are some of the events we all need to prepare for?
There are the events that we can expect such as buying a home or adding a child and then there are the unexpected events. Unexpected events could be minor such as car repairs or major such as loss of your job or a major medical situation that requires hospitalization or long rehabilitation process. Or there could even be a significant natural disaster that impacts your life.
What’s is the best way to prepare for life’s unexpected events financially?
First is building an emergency fund, having a ready reserve for major expenses or loss of income can really help. Secondly, don’t overextend on credit and live well within your means because won’t have to use as much of your emergency fund if your monthly expenses are less. Finally make sure that you have talked about your financial plans with others, especially your significant other.
How else should we prepare our financial situation?
One overlooked aspect is having the proper insurance coverages that include health, home, auto, life and even disability insurance. This means having the right amount of coverage for your situation. For home and auto balancing deductibles with the cost you can afford to pay is important while life and disability insurance should be coordinated with what your employer might offer for you.
Is there any actions that people need to help day to day decisions in a crisis?
One of the most important is have a power of attorney for legal and financial decisions if you become incapacitated plus a medical power of attorney if health care decisions need to be made on your behalf. This planning should also include medical directives so that your wishes are known by those making them for you.
How often should we review our financial preparedness?
I recommend at least every two years and always after any major life changes such as adding a child, buying a home or starting a new job. This includes looking at your emergency fund, insurance coverages and updating anything within your estate plan that may have changed. Unfortunately, being prepared isn’t do it and forget about it effort, you have to constantly confirm your preparations still fit your current financial situation.