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One of the greatest fears for any family is the possibility of financial ruin or disaster. Unfortunately, these things are all too common. More and more American families are facing financial hardship and unable to meet their financial needs if they miss even one paycheck. It is incumbent upon all of us to plan now for a financial disaster to ensure we can get through such a difficult time. Here are three ways to do just that.
Build an Emergency Fund
An emergency fund is critical to every family because it can make all the difference in tough times. It can serve as a financial buffer in the event of a sudden loss of income, and it can cushion the blow of an unexpected major expense such as large medical bills or a home repair. Dave Ramsey recommends that every family should have at least $1,000 stashed away — and ideally three to six months of emergency funding after that. Unfortunately, most people don’t. You want to be one of those who do.
Secure Your Income Sources
Since your income is vital to both your well-being and that of your family, you should seriously consider protecting it through the purchase of insurance policies. If you have dependents, you probably already realize the importance of life insurance to compensate your heirs for your loss if you were to pass away. However, you may not have considered a less drastic possibility. What if you were still here but unable to work? Financially, this scenario can be even worse. But Murfreesboro Insurance points out that disability insurance will largely replace your income in the event that an injury takes you out of work.
You might also think about diversifying your sources of income. If you have a genuine interest in something or a particular talent, it may be possible to develop it into a secondary career or business. That would cushion the blow from the potential loss of your primary job.
Cut Down on Expenses
Everyone knows that they’ll have to cut down on expenses in the event of a financial emergency, but it’s always better to act before things reach that critical stage. What expenses do you have that are unnecessary? How can you control the amount of money that goes out the door? Conduct a personal financial audit that will enable you to review all of your expenditures and identify possible ways to reduce them. Search through your household budget to find things that you can reduce or eliminate, and then plow that money into your emergency fund.
Remember, protecting your family against financial disaster isn’t about emergency actions. It’s about proper planning before a problem strikes. Good planning and foresight can save you pain and thousands of dollars in the future. Put something away now for a rainy day.
Are you in a tight spot right now? Read about more ways to save money here!
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