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In Case of Emergency: What You Can Do to Protect Your Family Financially

No matter how diligently or frugally you handle your family’s finances, unexpected circumstances always arise that can blow a hole in your family budget. Job losses, serious illnesses or major repairs to your house or car can drive your family to the brink of bankruptcy. To make matters worse, once your finances take an initial hit, it is more difficult to regain your financial footing.

ID-10049989However, it is possible to protect your family from the effects of unexpected financial emergencies, even if you cannot prevent emergencies themselves from happening. Begin by taking an honest assessment of your family’s finances. Once you are armed with this valuable information, you can work to establish a contingency plan and begin to set aside money in an emergency fund. It is also advisable to obtain legal services to deal with essential tasks such as writing a will.

Make an Honest Assessment of Your Family’s Finances

Do you and your spouse or partner both work? How secure are your jobs. While there are no guarantees, of course, some work situations are more secure than others. Do you rent or own your home? Are you current on your rent or mortgage? How much credit card debt, if any, do you have?

Asking yourself these questions may make you uncomfortable, but obtaining an honest assessment of your present financial status is the first step in protecting you and your family from potential financial disaster. If the answers to these questions indicates that your family’s finances are precarious, consider areas where you can cut back. Do you really need two new cars? Can you do without that cable television subscription?

On the other hand, even if your family’s financial situation seems dire, there are areas where you should avoid making cuts if you can possibly avoid it. Health and life insurance are just that – insurance against catastrophic health circumstances or premature loss of life. You should also avoid tapping into either your retirement fund or the money that you’ve put aside for higher education for your children (or yourself).

Establish a Contingency Fund

One of the basic financial tenets is “pay yourself first.” Many financial experts also advise that you set aside enough money in an emergency fund to pay all your expenses for at least three months – six months is better and a full year is better still. However, if you’re living paycheck to paycheck, you may believe that you cannot save any money at all. After you’ve determined areas where you can cut back, you may have more latitude to save. If your finances are so stretched that you cannot save, save anyway. Skip the local coffee shop once per week and put those funds in a jar. Take your lunch to work. Cook at home more often. Start small and build from there.

Set Up a Long Range Financial Plan

At the same time that you are working to correct your family’s present financial circumstances, you should also work toward securing the future. Schedule an appointment with a legal adviser to discuss the disposition of your estate. Determine how much money you will need to provide higher education for your children and retire comfortably. Set up an appointment with a financial counselor to map out a plan to help you reach your financial goals. The sooner you start, the more likely it is that you and your family will be able to successfully weather any financial storm.

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Image courtesy of Phaitoon / FreeDigitalPhotos.net.

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