Most people love surprises. But if there is one kind of surprise that no one wants, that would be unexpected expenses. It can come in the form of a medical emergency, loss of income, car breakdown, or home maintenance. Even early retirement and divorce can hurt your finances. What better way to prepare yourself for such money emergencies than to have a solid financial plan?
The sad news is, many of us still haven’t learned their lesson. According to Bankrate, about 28% of U.S. adults have no emergency savings. One can have many reasons why they don’t have a financial plan in case of emergencies.
A Lack of income
Many people only rely on a single source of income while the rich and successful have at least three streams of income. If you get yourself multiple sources of income, then you can afford emergencies without necessarily downgrading your lifestyle. You will have more funds to save and invest.
It is important that you get yourself some passive income on top of your active income. Take time to learn and develop new skills necessary in starting a business or investing in passive investments. If you are not sure how to do this, you can always hire a broker to help you out.
For instance, true ECN brokers can help you increase your profitability when it comes to Forex trading. You can turn Forex into a second income and start earning right away with the help of your trusted broker. The great thing about Forex trading is that it is both recession-proof and a great way to earn more in a short period of time.
Wrong or a lack of insurance
Not everyone understands just how important having the right insurance is. It is only when unexpected events do many of us felt guilty for not investing in the right policies. If you want to reduce your out-of-the-pocket costs, make sure you start updating your insurance policies and buy the ones you need asap.
According to Investopedia, everyone needs four insurance types. This includes health insurance, life insurance, long-term disability insurance, and auto insurance. Many would think that home insurance should be included. But, then again, more people are car owners than homeowners.
Each generation has a different source of debt. Credit card debts are the number one source of debt of millennials. Credit cards can indeed help you pay for emergencies when you lack the cash to do so. But then, many Gen-Yers are already in sky-high credit card debt that they need to find other ways to pay for financial emergencies.
With patience and discipline, you can eventually get out of debt. The best way to do this is to start living below your means and find yourself more streams of income. Start paying your dues on time and do more than the required minimum payment. While you’re at it, avoid acquiring more debts under your name.
For most people, massive debt, having the wrong insurance, and lack of income are their common reasons why they can’t afford “surprise expenses.” But in life, unfortunate events are likely to happen. The only way to avoid more financial setbacks in the future is by preparing yourself mentally and financially.