Preparing for the Financial Shock

an old window with broken glass and peeling black paint

60% of Americans experienced a shocking financial setback in the past year.1  Now is the time to assess your finances and get prepared, so the next financial setback won’t be a shock but a challenge you can easily overcome.

Here are some of the most commonly reported “financial shocks” and how you can prepare for them.

Loss of Income

Less than half of Americans (45%) say they have consistent expenses and a steady income.1  A Money Coach can help you plan for irregular and unexpected expenses, so a change in income won’t be so big a blow to your family budget.

Action Step:  Build emergency savings.  A good rule of thumb is to have at least 3 to 6 months’ worth of income saved for emergencies like a job loss.  Consider getting a separate account for emergency savings so you’re not tempted to (or accidentally) spend the money on something less important.

Medical Emergencies

Going to the hospital tends to bring a barrage of medical bills that can quickly get out of hand unless you’re insurance takes the brunt.  Understanding your financial obligations beyond insurance is the first step towards removing the financial worries of a medical emergency.

Action Step:  Take a moment to research your co-pays, estimate your out-of-pocket expenses, and set aside money each month to meet those costs.  For example, say you have to pay $300 out of pocket before your insurance starts covering your chiropractor visits.  300 dollars divided by 12 months is 25, so if you set aside $25 a month, you know you’ll have enough to cover $300 for a year if, heaven forbid, you get in an accident and hurt your back.

Significant Other: Loss/Split/Divorce

The emotional distress alone is enough to push you over the edge with financial worries.  During a time of loss, your Money Coach can be a source of support, so you don’t have to navigate new territory alone.  They can help you adjust to a single income, explain the financial responsibilities previously carried by your significant other, and ultimately get you back on your feet.

Action Step:  Communication is critical for healthy finances.  Set aside time each month to talk about household finances.  Consider making a list of expenses including debts, due dates, savings and investment accounts, and so forth, so you and your spouse are on the same page with how household finances work.

Major House or Car Repair

Anticipating and estimating the cost of repairs is an excellent way to stop the financial shock before it even becomes an issue.  Setting aside money each month, specifically for repairs, will give you savings to dip into when you’ve got a leaky roof or squeaky brakes.

Action Step:  Make a list of your big ticket appliances and research how long they will last.  Use that time frame to calculate how much you need to save each month in order to have the full amount ready when those appliances reach their expiration date.

The best way to avoid a financial shock is to have your finances under control.  Your Money Coach can provide financial guidance that equips you; through one-on-one consultations you get tools and resources that help you anticipate challenges and reach financial goals.  Prepare for financial shocks by working with a Money Coach.  Call 888-724-2326 today.

 

1Financial Security and Mobility.  “Americans’ Financial Security: Perception and Reality.”  pewtrusts.org.  The PEW Charitable Trusts, 5 Mar. 2015.  Web.  19 Aug. 2015.