A lot of households around the country are doing OK regarding getting by these days. But the simple truth is that getting by just isn’t enough, and it doesn’t take much of crisis to put tremendous strain on your family’s finances.
We all experience periods where we can’t seem to scrape together a few cents - the post-Christmas paycheck never seems to last the distance, for example. But what happens if the primary earner in your household has an accident or gets ill? Or what happens when you have no reserves or savings but have to pay for an expensive car repair or a critical problem with your home? Will you be ready financially or will you be in serious trouble?
The truth is that most American households are only one paycheck away from financial disaster. And if you don’t want to join them, you will need a few ways of getting hold of some money fast. I’m going to go through a few ideas on how to deal with a financial emergency with you right now, so read on to find out more.
Build an emergency fund
The first step towards financial security is to build up a good emergency fund. Ideally, this will be around six months worth of your typical household income, and although it will take most families a few years to build this up, the quicker you do so, the better. If you have a genuine financial emergency, this will ease your burden in so many ways, and you will be able to pay for expensive repairs, cover for lost wages, and ensure that your lifestyle isn’t impacted.
Insure everything
Insurance might be something you have to hold your nose to take out, but if you are in dire financial straits, you will be glad you have cover. Make sure you have the best coverage for health, household, and mortgage life insurance to ensure that the impact of the primary financial emergencies is lessened a little. You might think about taking out disability insurance, too, particularly if you are self-employed.
Cash in a structured settlement
If you are awarded a compensation payment for something like an injury at work, it might be offered to you in a structured settlement, where you get regular payments made rather than a lump sum. But in the event of an emergency, you might need that money to use now, rather than later. Now, you might ask the question ‘can I take a loan out against my structured settlement?’ But unfortunately it doesn’t work like that - you will need to sell your settlement. You also have to bear in mind that you will be selling your settlement at a discount, so think carefully before you sign anything.
Avoid debt whenever possible
Finally, borrowing money to pay for an emergency will often cost you a lot more than you think - it could be years before you manage to pay it all off. Wherever possible, avoid getting into debt - particularly from payday loan companies. Try asking family or friends if they have any money in savings and offer to pay them back at a slightly higher interest rate instead. This way, you will pay back less in interest while your family member or friend earns more, and the emergency is sorted - everyone's a winner!
No comments:
Post a Comment