How to Develop a 30-Day Emergency Financial Plan in Five Easy Steps
You won't have to look very far to find out the condition of our economy. News of a failing real estate market and stock market only add to the fear of noticeably rising gas prices and potential job loss. How can you protect yourself and your family?
Times like these call for a 30-day emergency financial plan to weather unforeseen circumstances. Even if you or your spouse aren't in a high risk category financially, you'll still be able to benefit from the peace of knowing that you're prepared to handle anything that might come your way. Here's how to do it in five easy steps.
Step 1: Figure out your number.
How much will you need to have 30 days of emergency cash reserves? Gather your monthly bills and bank statements and make a list of how much you spend per month. Remember to list even discretionary items like a cup of coffee and other miscellaneous spending activities. Be as complete and detailed as possible when making your list so that you've got the most accurate figure to work with.
Step 2: Build your emergency fund.
Once you've calculated how much you'll need for 30 days, figure out a way to obtain the money needed. Can you reduce your spending temporarily? Can you take on part-time work for three to six months? Can you do a combination of both saving and reducing expenses to speed up the time it'll take to build your reserves?
Step 3: Know where to stash your cash.
How safe is your money? There are several qualities you would like your investment to have. You want your reserve fund to be easily accessible, FDIC insured and you want your investment to earn interest. Another thing to consider is the possibility of your 30-day fund being tax deferred. If you are unsure where to begin, contact your financial advisor who can help you find the right place to hold your money.
Step 4: Find other sources of assistance outside of your nest egg.
In the event of an emergency, start looking for situational sources of income you may be able to qualify for. For example, some loans today come with a death benefit. In the event you or your spouse loses their life, the loan may be forgiven. Do either you or your spouse have life insurance or an annuity? If you were to lose your job, do you know where to call for state assistance? If you got hurt on the job or health issues have impacted your ability to work, can you make a claim for temporary disability? Do you have short-term disability coverage or a long-term disability benefit with your employer? Are there any charitable organizations that can assist you and your family in your time of need?
Find out the terms and requirements to qualify for financial assistance with these sources. Make a listing of state agencies, insurance companies, charitable organizations and any entity that can provide assistance to you and your family. Obtain names and contact numbers of people to call should you find yourself in an emergency situation.
Step 5: Organize your financial information.
When an emergency happens, being prepared will help ease any emotional burdens. Organize your financial information in one easy to find place. Create a file or binder containing original documentation such as birth, marriage and death certificates, life insurance policies, your listing of emergency resources including loan agreements and your financial statements.
Have peace of mind that you and your family are protected in the event of an emergency. By the way, once your 30 day reserve has been built, are you ready to take on the challenge of building a 60 or even a 90-day fund?