How to Protect Your Family Finances from Emergencies
Friday, June 12, 2020, 6:00 AM | Leave Comment
Keeping your family finances safe will requires protection from several different sources.
Think of it as a hub and spoke system. Your family is at the center and is protected by many tools that can either replace lost income, reduce your expenditures, or protect you if a major expense occurs.
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Savings
Set up an emergency savings account of at least $3,000, or whatever your 3-month projected income might be. If you’ve struggled to build savings in the past, consider the following rather drastic but very effective process. Be sure to talk with your spouse and any other family members who can both understand and contribute.
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Weld your wallet shut: For two weeks, buy only what you absolutely need. No fast food, junk food, or fuel for trips or other forms of entertainment.
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During these two weeks, carefully review your expenses for the last six months and get an average of what you’ve spent per month on necessary items, such as housing, utilities, fuel to get to work, and food.
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When you’re ready to open your wallet up a bit, go back to cash. Pay your bills in the normal way, but anything you need to shop for should be paid for with cash. Trying the “envelope” method might prove to be successful.
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Carefully review your pantry before you grocery shop and your closet before you buy clothes.
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Pay Down Debt
Once you’ve done the wallet welding step, list your debts on a spreadsheet program. Spreadsheets are a great option because you can sort them in multiple ways.
You need to track
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the monthly payment
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your interest rate
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the total still due
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the eventual payoff date
Depending on what you owe, a consolidation loan may be a good idea. It’s critical to note that you can borrow against a credit card for a limited amount of time at 0% APR. Use this if you’re ready to put away any credit cards you’re currently using. If not, don’t do a credit card rollover–It will just pile on more debt.
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Insurance
Everyone needs health insurance, and disability insurance is a good investment. Often, you can get this through your employer at a greatly reduced rate. Take it and pay for it. Insurance is something we pay for in the hopes we don’t need it; living without it can lead a family to financial disaster.
Too often, insurance companies will stall your payout in the hopes that you will give up and go away. You need someone to fight for you.
Chris Russo Law, a Lakeland personal injury attorney says, “Despite all of the attorney advertising today by volume law firms, an attorney-client relationship is still and will always be a personal service with open communication and trust at the center.”
If your family is young, buy a simple term policy for both adults. It will be cheaper than whole life insurance and you likely won’t need to access it. As you get older, you may want to consider another policy or make up for what a whole life insurance policy will pay out with retirement savings.
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Prepare At Home
As the COVID-19 bout of panic buying demonstrated, having a stash of food and paper products is critical to keeping your spending under control and your budget logical. Get creative with your storage ideas. For example, set up a bin of canned goods and stash it under your bed. Once every six months, pull it out and use up what’s close to the expiration date, then replace what you used and put it back.
Take care with staples such as dried beans and rice. Store them in the kitchen in clear plastic containers so you can check them for any bug growth. Rice can be kept in the freezer to keep it bug-free. In fact, if you can find the space, a chest freezer is a good investment because you can buy meat in bulk and freeze produce when the price is right.
Set up a pantry in your home. Stock it with extra toiletries, paper products, and personal care products. Again, a bin under a bed or a trunk used as a coffee table or seat can be a great place to store these extras.
Investing in sales items to reduce expenses in the future won’t help if you can’t find what you need. Buy enough to hold you for six months. Pay down debts as quickly as you can. Go back to cash to make money real again. Protect your family with insurance and savings.
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