Posted on 18 June 2012.
With the state of the economy over the past few years, it has become harder to get by financially. Many people are doing just what they can just to pay the bills, but even more people are not prepared to handle an event that can cause financial disaster. These distastes come in many forms; a job loss, sudden illness, or a major car repair can wreak havoc on a your personal finances if you are not prepared. The good news it is not hard to prepare for the unexpected. All it takes is planning.
Here are a few easy steps to take prepare yourself for a financial emergency.
Start an emergency fund – The amount to save is a hotly debated topic that ranges from 3 months of financial expenses to 12 months of financial expense. I know it is not easy and it can’t be done overnight, but you must start somewhere. Try to put whatever you can into a savings account every month. You can also try the dollar savings plan if you use cash.
Use direct deposit – With direct deposit, you will know that your paycheck will be in your bank account and you will not need to worry about getting to you bank before it closes. This will help you if you cannot go out due to illness or in the event of natural disaster that causes your bank to close temporarily.
Use online bill paying – You do not have to use this service every month, but it can come in handy if you have all your accounts set up. Let’s say you forget to pay you cell phone bill before you go on vacation and it is due. No problem, sign on the internet and pay it.
Get an ATM/Debit card – I prefer an ATM card to a “fake visa” that you bank issues as a debit card. You may not regularly use cash or have a need for a debit card, but there are some circumstances where it may be necessary. If you don’t use one regularly, get one anyway and keep it in a safe place.
Set up a home equity line of credit – This option is not available to most people given the current economy, but if you can get one, you can use it until you have your emergency fund built up. Unlike a home equity loan, which provides you with a lump sum of cash right away, a home equity line of credit provides you with cash that you can use a little at a time and only when you need it. If you don’t actually take any money out, you don’t have monthly payments. However, if an emergency strikes, you’ll have cash available. This can be particularly helpful if you find yourself out of work for a short period of time. Your bank won’t lend you money when you are out of work, so plan ahead of time and the money will be ready when you are.
Plan for financial disaster now and experience the comfort of knowing you are prepared if an emergency strikes. A little bit of planning can go a long way to helping your through a financial emergency.