If you lost your job or suffered a serious injury tomorrow, would you be financially prepared? One of the cornerstones of financial freedom is being prepared for setbacks, but increasing your savings while also paying down debt, saving up for big-ticket purchases and possibly providing care for children or aging parents can be a challenge. Here are some quick tips for financial preparedness.
Know What You Can Trim
- If you’re happy with your budget as it is, there’s no need to make any changes right now. However, you do need to be aware of how to scale it back in case of disaster. Can you bump your cellphone plan down to the minimum package without a penalty? Can you do the same with your cable and Internet packages? Do you really need the expensive auto loan? Find out and create a list of all the ways you can scale down if a financial problem crops up. This will give you peace of mind and a plan to work from if you run into financial difficulty.
Be Certain of Your Insurance
- A lot of financial setbacks happen due to no fault of your own, but adequate insurance can help soften the blow. Your employer may offer everything from health to life insurance, and you can purchase individual policies to cover any gaps. Review your insurance to ensure that your family will be provided for in cases of lost income, injury or death.
Increase Your Savings Account
- Even if your current budget is working out well, there are usually ways to save even more. For example, a home or auto refinance can lower your payments and allow you to beef up your savings. You can also save by using coupons and taking advantage of sales. Roll all of the money you trim from the budget into your emergency fund.
Spend Wisely to Save In the Future
- Sometimes it’s necessary to spend money in order to save more in the future. Don’t shirk on items such as roof repairs for your home or new tires for your car. Pushing these expenditures off until later can be a disaster, as the problem will only grow worse and more expensive over time. Waiting for new tires can lead to poor alignment or even an accident, while delayed roof repairs can lead to water damage to your whole house or pest infestations. Budget for repairs and routine maintenance and it will save you money in the long run.
Have an Alternative Income Stream Available
- With the proliferation of the online market place, nearly anyone can have a side business. Consulting, writing, artwork, making handmade goods and performing side work are all viable options, depending on your abilities and talents. Take a good look at your skill set and find ways to diversify your income stream. Once you are bringing in money from several sources, you can be much more confident if your primary job is eliminated. You can then give your side business more attention while you interview for a new position. While setting up side income sources can be tedious, you’ll be glad you took the time.
Being financially prepared for setbacks is important. Luckily, there are lots of different approaches to saving money, diversifying your income stream and being well-insured that you can use to your advantage. Don’t try to do everything at once, as it can be too overwhelming. Take your time and find your own path to financial freedom. While it can take time to find the right plan for you and your family, you’ll be glad you made the effort.