Springtime in the Midwest means tornado season. We prepare for it by testing our emergency sirens, locating the safest place in our house to take cover, and what to bring with us in a hurry if a storm strikes.
Here is something to consider throughout the year: do your finances have a disaster plan?
Working in the financial industry, I encounter people on a daily basis that share with me their financial disasters (large and small). Although we can’t always prevent the curveballs that life throws at us, we can be prepared to take action when they do.
Emergency Stash
Having an emergency fund is a great first step to creating your financial disaster plan. A few hundred dollars can get you through a minor car repair, emergency room visit, or an unexpected expense. I recommend utilizing payroll direct deposit (if your employer offers it) to direct a small amount of money from each paycheck into a separate emergency savings account. Direct deposit options work well because you don’t have to think about it. Over time, your emergency fund will grow to allow you to not only cover those minor “what ifs” but may provide you with some means to pay down debt, take a vacation, or tackle a project.
Having a Will and Advanced Directives
If you have children, you should have a Will. My husband and I had this conversation before our oldest was born: If one of us was hit by a bus tomorrow, what would we want to happen? An even scarier scenario is what if both of you were no longer here? Who would you want to assume guardianship of your children? If no Will exists, it is up to the State to determine this answer. You can hire an attorney to draft a Will for you, or even do it yourself with some free online resources.
Secondly, have you talked to your loved ones about what they should do if you were unable to make decisions for yourself? Power of Attorney and Living Wills are not just for senior citizens. If you were in an accident and unconscious, would your spouse, parent, child, know what your wishes are both physically and financially? Does someone else have the power to access your information to take care of your family?
Make Insurance Work for You
Visit with your Insurance Company on an annual basis to shop your premiums. Sometimes, your rates may go up when your plan renews, and you may want to shop for a better plan. Also take a look at what your insurance covers. On your home, does your policy cover floods even if you are not in a flood zone? What about wind damage?
Research your deductibles. Talk with your insurance provider about how raising your deductible will impact your premiums. It may be the case that if you can raise your auto insurance deductible from $250 to $500, the savings on your premium per year may be significant. Besides, if you have created that emergency stash to cover your new deductible, you’re covered on all sides.
Life insurance is in a category by itself. While not required to have (like home and auto insurance) life insurance can provide you and your family with a multitude of benefits. There are term, whole life and investment policies that can work to pay you an income – there is no cookie cutter approach to this insurance benefit. I do recommend that you work with a insurance agent you can trust that walks you through all of your options, and is willing to provide you with multiple comparisons for you to make the best choice.
Do You Have a Financial Disaster Plan to be continued…