It is important to have a financial First Aid kit to fall back on.
While not all unexpected events are negative, generally, the big ones that affect your financial future tend to be negative surprises. This possibility of unexpected financial hardship means you may need to change the way you think about and handle your money.
A little planning now will make those emergencies and unexpected events a lot easier to handle when they arrive.
Even the most careful planner may be taken by surprise with an event that they had not planned or prepared for (Take for instance, the current COVID-19 Virus pandemic). The best way to handle these events is to prepare for the unexpected in advance.
While you certainly can’t plan for everything, it is nice to know you have a contingency plan in place just in case things go awry. Keep in mind that once you experience an unexpected expense, you may need to re-assess your current plan and make changes.
The first step for preparing for the unexpected life event is to have a solid emergency fund in place. Your emergency fund should be relatively liquid and should cover anything from three to six months of your standard living expenses.
This is especially important if you should lose your job and have a hard time finding another one, or suffer an unexpected illness where you are unable to work for an extended period and will have a gap in your earnings.
It is nice to know you have the money there while you are dealing with other issues such as job loss, illness, or anything that might affect your income.
We live in a part of the world where people don’t understand the significance of life insurance.
It is important that you have adequate life insurance to provide for your family. This will benefit your spouse—if you are married—and will provide for any children you have. When your family depends primarily on your income to pay debts, life insurance is doubly important.
The value of the policy’s death benefit should provide enough money for your beneficiary to fall on after you pass away. If you have children, you should get enough that it can help cover the cost of their education. It is vital that you have life insurance coverage if you have children.
Additionally, you should make sure you have adequate coverage in areas such as health insurance coverage, and car insurance coverage. While you may be adding bills to your monthly budget, having this coverage will save you in the long run.
We tend to gamble with not having health insurance coverage. However, accidents happen, and medical bills can add up quickly. All it takes is one serious illness or accident, and you could find yourself deeply in debt. If you are injured to the point you can no longer work it will compound the problem.
Depending on where you live, it may be wise to plan for unexpected disasters. They can come upon you suddenly, and you need to be prepared to deal with them.
Let’s use COVID-19 as a case study. Seeing that there is a curfew now in Lagos, Abuja and Ogun State. People are staying at home with no work to do and likely no money for most people.
An essential element of your emergency kit should include a small amount of cash to provide the basic needs to survive during the period of which the disaster will last.
Finally, you may want to sit down and create a backup budget (Regardless of how small it can be). The backup budget should leave out the things you could cut back on or do without if necessary. This backup will help you be ready in case you experience an unplanned financial event or a period of unemployment.
If you make the plan now, it will be easier to put it into place when and if the time comes. At the beginning of a crisis you may not be thinking clearly, and it helps to have a plan already laid out that you can follow.