How to Prepare for Financial Challenges
Financial concerns have the potential to keep us awake at night. Unfortunately, most of us wait until a crisis is upon us before we get busy. Do what's best for you and your family and prepare now. You’ll sleep better at night knowing that you have plans in place for contingencies.
Begin using these strategies now – before a financial challenge arises – and you’ll lessen its negative impact on your life:
1. Have sufficient savings. Set aside enough money in things like checking and savings accounts, money market accounts, and short-term certificates of deposit to cover 3-6 months of living expenses. You should have this in place before you begin investing money elsewhere.
Some benefits of these accounts are that they don't fluctuate with market conditions, and there is no tax penalty for withdrawing the money, unlike retirement accounts.
2. Make a budget. If you don't already have a budget, there's no time like the present to get started. The first step to making a real change is to measure where you’re at right now.
Developing a budget will provide you with the information you really need to take control of your spending and free up funds for saving.
3. Consider how you would reduce your monthly expenses. You don’t have to make changes now, but take a look at your monthly bills and see where you could alter your spending if you needed to. You’ll feel most financially secure with a plan already in place.
4. Be aggressive with your bills. Get organized and sit down with all your bills twice a month to pay the bills that are coming due. Many families waste money every month in late fees and other penalties.
· Make a list of all your bills and their due dates. Review as needed to ensure that you pay on time.
5. Reduce your credit card debt. Credit card interest can really eat into your budget every month. If you have your emergency savings taken care of, this is now the best place to put any extra money after your expenses have been worked into your budget.
6. Find a less expensive credit card. If the interest rate is high on your current card, shop around and see what you can find. You may be able to receive a zero interest offer for balance transfers or a greatly reduced interest rate, at least to start with.
Never pay more interest than you have to. However, be sure to read the fine print with any credit card offering.
7. Earn some extra cash. Sell some of the stuff in the garage, attic, or basement that you don't really need and use the extra cash to build up your savings or pay off credit card debt.
· Establish a second income source. This is especially handy if you happen to lose the first.
8. Review your insurance coverage. Are you getting the best deals? Shopping around and comparing policies is time well spent. Also consider disability insurance if you don't already have it. Ask yourself if you'll be able to pay all your bills if you’re sick or injured and can't even get out of bed.
Don't wait until a financial challenge comes into your life, instead, begin your preparations now and avoid the stress.
Financial hiccups happen to everyone, but those who are ready for them are better able to get back on their feet quickly. Get started now and you'll sleep like a baby while others are up late worrying about financial disaster.
-Tiffany M. Vaughn, CPA