It was supposed to be an epic family vacation. Until it wasn’t.
Picture this: We had just moved into our temporary rental in Nashville, Tennessee, and we were so ready for a break.
One cool thing we didn’t realize at the time was the fact that our new school district has what’s called “Fall Break.”
Now, we’re totally used to taking a break from school for Thanksgiving, but this particular break takes place in October. All of a sudden, we realized we had three school days off plus the weekend to do something fun.
Hooray!
After talking to a lot of parents in our neighborhood, we learned that Nashville locals spend their fall break in a place called 30A, which is located in the Panama City Beach area of Florida. After hearing this news, it didn’t take long for Mandy and I to settle on a sunny beach getaway.
I mean, what could go wrong?
Unfortunately, we found out that even the most amazing vacation plans can fall apart in the blink of an eye. Before we even left the house, our youngest son came down with the stomach flu. We were worried he wouldn’t recover in time, but thankful when he rallied at the last minute.
But, our trouble didn’t end there. Once we arrived in Florida, my oldest son started getting sick. And while one kid getting sick isn’t the end of the world – especially when you have four – the world really does come to a standstill when mom and dad are desperately praying for recovery.
Sure enough, my wife got hit with the same stomach bug the last night of our vacation. And about 90 minutes after she started puking, I joined her. We were both down for the count, puking up everything that we had consumed that day.
While the experience was horrible, thankfully, it wasn't serious enough where we had to go to the emergency room.
Of course, not everyone is so lucky. You hear horror stories all the time of somebody getting hurt while away from home and having to deal with some sort of medical or financial crisis. We avoided it this time, but definitely got me thinking “what if.”
- What if we had to take everyone to the emergency room and cover our large medical deductible in one fell swoop?
- What if we had to stay a few more days in Florida because we couldn’t drive home? What kinds of additional costs would we encounter, and how would we cover them?
- What if one of us had an extended health condition that made it difficult for us to work?
The reality is, any of these situations would have been fine for us, mostly because we have our financial ducks in a row. But, I realize that’s not the case for everyone.
If you’re trying to figure out the best ways to handle a financial or medical crisis, here are some steps to take:
Step #1: Always have an emergency fund.
No matter your financial situation, having an emergency fund is crucial. Without a fully-stocked e-fund, it’s hard to cover surprise expenses like a leaky roof or a car repair, and you’ll be a lot more susceptible to financial issues if you have a medical emergency.
How big should your emergency fund be? Now, that’s an entirely different question – and I’m torn on the answer.
Many “experts” say you should have 3-6 months of expenses in cash, but for some people, that’s a lot of money that would be better off invested.
Other “experts” like Dave Ramsey say you should start with a baby e-fund of at least $1,000 and work up from there.
I tend to believe that your emergency fund can be flexible, as long as it provides enough cash to cover your potential liabilities if somebody got sick or lost their job.
As you start building an emergency fund, consider asking yourself these questions:
- Will my emergency fund cover my deductible so I can get medical care without going into debt?
- How long will my emergency fund last if I lose my job or can’t work because I’m sick?
- How much are my monthly bills?
From there, you can figure out how much you need and start building your fund in a high interest savings account. If you’re worried about not having enough, try to commit to saving $50 or $100 per month then ratcheting it up over time.
Remember, a small emergency fund is better than no fund – and you can continue building it up as time goes on.
Step #2: Plan for the worst.
As an optimist, I always hope for the best for my family and everyone I meet. But, that doesn’t mean you shouldn’t have a plan in mind if everything falls apart.
Having an emergency fund is a good example of hoping for the best but planning for the worst-case scenario. You might hope you’ll never have to use your e-fund, but in reality, you’re probably going to use it for medical bills, new tires for your car, and other boring expenses you’ll wish you didn’t have to pay.
Other ways to plan for the worst can include things like:
- Buying term life insurance as income replacement
- Buying disability insurance in case you can’t work
- Having proper limits on your auto coverage so that, if you get in a wreck, you aren’t left in the lurch
- Having health insurance coverage that protects your family from catastrophic medical bills
Of course, none of this sounds fun – and it’s not. However, planning for the worst is crucial if you’re going to escape financial disasters and medical emergencies unscathed.
Step #3: Live below your means.
Here’s a piece of financial advice that works for everyone no matter your income or your status:
Live below your means, and you’ll be a lot better off.
Unfortunately, a lot of people prefer to live at or even above their means. How many of you know a high earner or family of high earners who spends every penny they earn and more? How many of you know someone who is moderately wealthy who doesn’t have a dime in the bank?
As a financial advisor, I’ve met far too many people who earn enough on paper but spend every dime. Unfortunately, this puts them in a perilous situation where any emergency -financial or medical – can cause their finances to spiral out of control.
If you want to avoid situations where a job loss, illness, or health condition leaves you broke, the best thing you can do is spend less than you earn and save the rest.
Step #4: Figure out what you owe, and hatch a plan to pay it back.
Ideally, you’ll have an emergency fund in place long before you encounter a financial or medical crisis. But, what if you don’t?
If you wind up owing money after a financial crisis, the best thing you can do is figure out what the damage is and the best ways to pay it back.
Start by adding up the grand total of your bills. From there, you can figure out how much you might need to pay monthly to pay back what you owe.
Let’s say you racked up a $5,000 bill in the emergency room or getting your car repaired. How much could you pay each month to whittle the balance down, and how long will it take you to pay it all off?
If you had to charge the balance on a credit card, what is your interest rate? And how will your interest rate affect your repayment timeline?
Most of the time, a good credit card payment calculator can help you figure out how much you’ll owe each month, how much of your payment will go to principal, and how much you could save if you paid down debt faster.
Step #5: Handle financial emergencies responsibly.
While a credit card can certainly help you out of a financial jam, be aware of the risks you may encounter with using credit for emergencies without considering other options. For starters, credit cards can come with higher interest rates than other financial products, so look at your credit card rates versus, say, unsecured loans, for emergency expenses. Further, credit cards don’t come with firm payoff dates or fixed payments, so it can be all too tempting for some to make the minimum payment and delay paying off the debt.
There are many financial tools out there that could help if you find yourself in a financial crisis. It’s good to know what’s out there if you don’t have the funds needed in an emergency in savings, and need funds quickly.
Personal loans are a financially responsible tool I’d recommend. Since personal loans are unsecured, you can also get one without collateral. If you’re approved, most lenders provide funds within the week. I know with Discover Personal Loans, upon approval funds can be sent as quickly as the next day after acceptance. You can choose from a variety of flexible repayment plans to fit what works best for you. Not only that, but they have a fixed monthly payment and a fixed repayment timeline so you’ll know exactly what you owe every month and can easily budget and get back on-track financially..
If find yourself with higher-interest debt from handling the financial jam, personal loans can also help to consolidate and pay down your debt. While personal loans still involve borrowing money, they can come with lower interest rates than other financial tools and have a set pay-off date.
If you choose the personal loan route, it’s also important to make sure you choose a loan company with no origination fees – Discover Personal Loans is one.
The Bottom Line
Life happens, and there’s no way to avoid every emergency or disaster the world throws at you. But, with a plan, you’ll be ready to fight back and get back on track.
By having an emergency fund, planning for the worst-case scenario, living below your means, and handling emergencies responsibly, you’ll be prepared for anything that comes your way.
This is a paid post written by me on behalf of Discover Personal Loans. All opinions are my own.
The post How to Recover from a Financial Crisis appeared first on Good Financial Cents.
Source Good Financial Cents http://ift.tt/2krP3Zi
ليست هناك تعليقات:
إرسال تعليق