If you are living on a limited and uncertain income source then you may be living on the verge of financial disaster at all times. It will not long to push you over the edge and caught up in a situation that can be difficult for you to climb out of. There are things you can start doing today to begin disaster proofing your finances. If you follow these seven steps, you should be able to weather most storms that life will throw your way.
1. Always Keep an Emergency Fund
The first step is set aside money for an emergency. When you are in debt, your emergency fund will be smaller, about one month’s expenses. This can be used to cover you if you have an unexpected expense or if you are put on furlough for a week or two. It will allow you to handle what comes your way and make it easier to work on your next goal. Once you have gotten out of debt work on saving up a year’s worth of expenses for your emergency fund.
2. Always Plan up a Budget
Setting up a budget may seem basic.That is because a budget gives you control over your money. It allows you to decide what to spend and where. It helps you spot problems before they become serious or you know when to cut back on spending or when you need to look for a better paying job. It will help you find money to reach your other goals.
3. Get Rid of all yours Debts
When you do not have to make monthly debt payments, you can get by on a lot less. You will also have a lot more money to spend on the things that you want to have. Take the time today to set up a debt payment plan and to find extra money to start paying down your debts.
4. Get a Health Insurance
Health insurance may not seem very necessary when you are in your twenties. Most people in their twenties are pretty healthy and rarely go to the doctor, but it only takes one minor or major accident to make you rethink whether or not you should have health insurance. Surgery for a blown out knee or an emergency appendectomy may cost you as much as you make in a year. Health insurance lets you handle the little blips that life throws your way and makes them more affordable.
5. Remember to Get a Life Insurance
Life insurance is not for you as much as it is for those that you care about. If you are married or you have kids you are responsible for, you really need to have the coverage in place. You should have coverage for your spouse as well. This will allow you to replace the income if something were to happen to either one of you. It will help your kids be taken care of and give you a chance to get back on track if your spouse or partner were to pass away.
6. Do not Forget Home and Car Insurance
Home and car insurance are the best way you can protect your property. If you are currently renting, then you need to get renter’s insurance that will cover your belongings. This insurance will cover you if you deal with most natural disasters, and with accidents and fires. You need to check to see if you need flood insurance for the area where you are living. If you are prone to floods, this can help you recover from a storm since many policies will not cover flooding.
7. Consider Multiple Sources of Income
If you are single or if you are the sole provider for your family, you may want to consider setting up multiple income streams to protect your finances. If you are an independent contractor, it is essential to have multiple income streams because work from clients can dry up, and you will not qualify for unemployment insurance. Take the time to figure out part-time work you can do in your spare time to set up these streams.