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The changes in the financial environment recently caused by the coronavirus outbreak have caused many of us to rethink what we need to do now and in the future to prepare ourselves for financial backup in case something else comes our way. Listed below are at least seven ways we can prepare financially for the future to provide a backup plan.
There are many things we can do if we just sit down and think about it. Creating an emergency fund for the future is a good first step; We need to take a look at our coverage policies and plans for life, home and natural disaster, health and disability. It is important to prepare a budget and a backup budget for when things get rough.
It is important to eliminate debt, especially paying off high-interest debt, with the goal to be debt-free. We need to reflect on our convenience purchases and cut back on luxuries and non-essentials such as the daily printed paper, unread magazines or that morning coffee stop.
Another idea is to create extra cash. Be creative with your ideas. We can grab extra jobs for cash. Finally, we need to keep maintenance on our cars and our properties so we aren't stuck with unexpected bills.
BUDGET & FALL-BACK BUDGET
The first step in preparing ourselves for future financial problems is to create a budget for day-to-day income and expenses. The budgets are important so we can keep track of the income that we have coming in on a regular basis and how we need to spend that money.
We will go through our finances and determine what are necessary items, what are luxury items, and what are items that we can live without on a day-to-day basis. Budgets will help us prepare for the future and put aside extra funds for emergencies.
Insurance is an important matter to consider. Life policies take care of your family if something happens to you. Programs like AFLAC take care of you in case you become disabled. Vehicle coverage takes care of your car if you have an accident or theft. Homeowner’s policies protect your home. Health coverage is another important coverage that you need in case things happen along the way. Sit down with your agent and figure out which programs are best for you.
We all have the ability to create extra cash. Many of us have extra things laying around the house we don't use and could easily sell on eBay or any of the selling sites. We can drive for a food delivery service or for something like Lyft or Uber. Babysitting jobs are often available. Or you can freelance your services for the things you know; for example, the things you do at work.
The emergency fund is for simply that, emergencies that come up from time to time, whether they be car repairs, home repairs such as a water heater going out or something unexpected. We should actually have at least two emergency funds.
One for those for emergency situations where we need money on the spot to take care of something. The other would be for longer-term emergency situations like we have now with the coronavirus or losing a job or some other calamity that affects how we do business day-to-day.
How much you put aside for an emergency fund is a matter of preference. Some people prefer to set only two to three months of funds aside equal to their normal income. Others prefer to set aside up to a year's funding for major catastrophes. It all depends on your preferences and how you feel you can get through the situation.
CREDIT CARDS & FEES
You've been working hard to create good credit and pay off debt. Take advantage of this and lower your interest rates on credit cards and loans. Most companies will work with you. You can also reduce fees with your banks. Be careful with the ATM and how often you use them and pay fees. All of this can add up to extra cash in your bank to put in your emergency funds.
Many of us belong to incentive programs, whether it's for airlines, gas purchases, store purchases. Even groceries. There are so many options out there nowadays. Just by viewing emails, making purchases or using coupons, I get points. I redeem these every year for hundreds of dollars worth of gift cards.
If you have a few extra dollars, or you can just create a few extra dollars by using your daily change, you can join programs such as STASH. You direct where your funds are going to be invested. With the stock market faltering, now is the time to buy bargains and save them for the future and watch your savings grow.