Whatever your situation — whether you’re a solo entrepreneur, a freelancer, or a contract employee; whether you rent or own your home; and whether you’re married or single — we’re united by the fact that we’re all likely to experience a financial emergency at some point in our lives.
Most of us know how important it is to keep a handle on budgeting. Many of us take time to devise a financial strategy that keeps outgoings like rent, utilities, and other everyday expenses at the forefront. But we can often forget or misunderstand the importance of putting financial provisions in place incase of an emergency.
Read on to learn five financial emergencies most people fail to consider. Below, you’ll find some possible solutions for financial emergencies should one present itself.
1. Unanticipated Medical Issues
An unanticipated medical or dental emergency can quickly throw your finances out of shape, especially if you don’t have medical insurance and your work benefits won’t cover the costs. These fees and any unpaid time off can significantly dent your savings.
2. Vehicle Emergencies
Having a family vehicle breakdown (one that gets the kids to school and you to work each day) with no immediate funds to cover repairs is sure to have knock-on ramifications.
The average vehicle repair cost drivers between $500 to $600 last year, and sometimes ‘much higher,’ according to AAA. With these costs set to rise by approximately 20% this year, having monetary provisions in place is a savvy move.
3. A Major Appliance Breaks
Major appliances are key to our everyday comfort and well-being. A furnace breaking in the dead of winter or your fridge packing in the week before Christmas? These are both less-than-ideal scenarios you’ll no doubt want to resolve quickly.
4. You Lose Your Job
It’s hard to predict losing a job. While you may have an inkling of the impending end, it’s often not in advance enough to build a fund to see you through an unlimited period of unemployment, which will be vital if you don’t receive severance.
5. A Pet Requires Medical Attention
Every pet owner knows that vet bills can be incredibly high. If you don’t have ample pet insurance, scrambling to find the money to cover emergency bills can be financially and emotionally stressful.
How to Prepare for a Financial Emergency
For one, start creating an emergency fund today. Money will quickly accrue if you put aside $20 or $100 each week. An ideal emergency fund will be able to cover three to six months of regular expenses. Set up an automatic deposit to keep things on track.
Know your options. In some cases of emergency, an emergency line of credit can help you cover costs. This is a good route if your credit card is at its limit, and you don’t yet have an emergency fund, or it’s depleted and not yet rebuilt following another unanticipated fee.
The Takeaway
We often don’t prepare for the unexpected because it’s not something that we want to think about; ignorance is bliss, after all! However, by building your emergency fund starting today, you can sidestep any consequential financial stress with ease.
