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7 Financial Emergencies In Life That You Need To Know How To Deal With

7 Financial Emergencies In Life That You Need To Know How To Deal With

You may be surprised by some of the categories included, but when it comes to finances and emergencies the biggest thing between the two is the unplanned. When you make goals, you should include contingency plans and always maintain an emergency fund. When life’s twists and turns arrive, you will be better able to enjoy the ride rather than fear the consequences.

Job Loss – the financial emergency we often encounter first

From our first fast food working days to the jobs we plan to continue throughout our careers, job loss is one of the most prevalent emergencies–and losing a job is an emergency everyone should plan for and plan accordingly. Even a 16-year-old working his or her first job should plan to become unemployed. The reasons people lose jobs vary widely, but a simple plan involves saving at least one month’s pay. Depending on the responsibilities the individual has at the time, saving more money may be necessary. It all comes down to planning to cover the most immediate needs because even when working your first job, you need to prepare to pay your bills if you lose the job.

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Marriage – emergencies occur when combining debt

Believe it or not, marriage can be a financial emergency–especially if you marry into debt. You shouldn’t marry for money, but when you and your fiance (or fiancee) acted irresponsibly with money before you decided to partner for life, you need to plan for impending emergency. The best defense against marrying into debt is not to separate. Instead, make a plan to pay down individual debt and create goals for the short and long term. These goals can include things like paying off credit debt or building credit scores in order to get pre-approved for a house.

Divorce – separation costs more than partnering

The last thing lovers want to think about when marrying is divorce, but this financial emergency is a startling reality for many couples. The best way to plan without hurting your partner’s feelings or giving strength to pessimistic thinking, is to take steps to maintain the relationship. In addition to “planning” for divorce, just planning in general for financial emergency will protect you against this one.

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Natural disaster – financial emergencies ahead

How common are tornadoes, earthquakes or floods in your area? When you buy a house or even rent an apartment, keep the possibility of natural disaster in mind and buy homeowner’s insurance or renter’s insurance. Watching the weather and planning for escape never hurts if you live in an area that suffers disasters often, but in addition to an underground shelter, you can shelter your finances by insuring them.

Bankruptcy –  avoid the biggest financial emergency

Bankruptcy is the cold, hard truth for many who take calculated business risks as well as those who simply enjoy their youth too much. When establishing credit, use the limits as a gauge instead of a hard line. If your credit card allows you to charge up to $5,000, you should keep a balance of about $2,000 at most. How much debt you carry is a calculation lenders consider, and many suggest your debt-to-credit limit percentage should be 30 percent or less. In “planning” for the financial emergency of bankruptcy, remember you cannot write off student loan debt. Keep that in mind if you spend your refunds at the bar.

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Retirement – will you have enough?

Most people who join the workforce intend to retire so they can actually enjoy the money they earned working hard at a career for so many years. The sad fact is that for many entering the workforce in 2014 and the years to come, social security may not exist when retirement arrives. If you fit into a category in which you cannot count on retirement or a pension, make sure to consult a financial adviser and create a plan to investing that can help protect your plan to retire. People live longer now than they did in the past, so long-term-care insurance may be a wise investment to protect what savings you accumulate while working.

Death of a spouse – planning for the hard times

Topping the list of things no one wants to think about is losing one of the closest people to you in your entire life. Apart from a parent, who you expect to lose before you die, and a child, who you never hope to lose before you die, a spouse’s death is purely catastrophic. Not only do you suffer emotionally but also financially. You can plan for death in a similar fashion to planning for divorce, by saving money in an emergency or trust fund. You can also take out life insurance to protect against the financial devastation that comes if your spouse’s income provided the majority of household income on which you need to live.

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In all cases of financial emergency, looking into the future and recognizing the potential for disaster is possible. Insuring, saving, and most importantly, planning are your best calls to action in recovering from any financial emergency–now that you know what the big ones are.

Featured photo credit: morguefile via mrg.bz

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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