At one point or another – regardless of how organised you are when it comes to your finances – there will, most likely, be a time when your finances go a little wrong due to an unprecedented situation occurring that you simply didn’t expect. When that happens, knowing how to effectively deal with the situation is important, because if you take the wrong approach you could end up making things a whole lot worse than they already are.
Instead, take a moment to gain clarity on the situation that you find yourself in and work out how best to approach things. Now, what it’s important to be aware of in the present is the fact that you can prepare for the unexpected and remain financially savvy in almost every situation. It’s just a case of knowing how to approach things, that’s all.
Bearing that in mind, how can you prepare for the unexpected and what steps do you need to take in order to be prepared? For everything that you should know about how you can be financially savvy in almost any situation, below is a guide to some of the key ins and outs that it would be beneficial for you to be aware of.
Ensure you have adequate savings
First things first, the most important step in being financially savvy is ensuring that you have adequate savings in place. What this means is making sure that you have enough savings to cover you – and all of your most important bills, from rent to food – for a period of at least three months. Having this financial buffer in place means that should something unexpected happen that cuts off your current income stream, you know that you’re covered for a few months while you try and get your finances back on track.
Starting to build up a nest egg of savings can seem daunting, because there’s a lot that you need to think about. The best approach to take is to put 10 percent of everything you earn into a savings account, and then from anything you have leftover at the end of the month, put another 10 percent into your savings account to help top it up. Over time, this process will allow you to start to build up your savings, so that should something go wrong, you’re covered.
You might also want to consider opening a second savings account, splitting your accounts down into your emergency living fund with three months worth of pay saved into it, and a second account for saving for different life goals, from holidays to buying the house of your dreams. This way, you won’t accidentally dip into the wrong account.
Operate multiple income streams (if possible)
One of the most common reasons why you might find yourself in an unexpected financial situation is due to losing some work. When it comes to losing work, this can have a big impact on your financial health and can be a total nightmare to deal with. This is especially true when you have just one income stream to rely on, which is why it’s good advice to operate multiple income streams, if you’re able to do so.
Instead of having just one main income stream, it’s always advisable to have at least two different income streams available to you. This way, should you end up in a situation where you lose one income stream, you have a second option to fall back on as your safety net.
Always take out insurance
When it comes to your finances, never leave things down to chance. Make sure that you always have adequate insurance in place, for everything, from your life (and your partner’s life) to your income. This means that whatever happens, you should have some form of cover in place, allowing you to protect yourself from financial ruin.
Take life insurance, for instance, it’s a vital asset to have in place, particularly if you share your financial responsibilities with a partner. For instance, say your partner is killed in an accident that wasn’t their fault, while you can speak to a wrongful death attorney and see if you can claim that way, having adequate life insurance in place can be extremely helpful. That’s why it’s so important not to undervalue how useful having adequate insurance in place can be.
Preparing for the unexpected is never easy, but with the right approach, you can take steps to make sure that you have prepared your finances to withstand almost any situation.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
