Many people talk about protecting your income for the unexpected and having savings for those "just in case" times in your life. But if you do not know when something will crop up, can you adequately prepare for it, and exactly how do you manage to sort your life and finances for something that may never happen?
The covid pandemic has already shown us how the world can change instantly, and many people have had their lives disrupted by the events that have transpired since early 2020. Few have been lucky enough to come out of this unscathed despite the end of the pandemic not even being in sight yet.
Change Your Mindset
If you think "it won't happen to me," then think again. This train of thought has tripped up many people in the past, both during and pre-pandemic times. While things might seem safe and secure now, things won't always be this way, and failing to plan is planning to fail, as they say.
So change your mindset from it will never happen to what can I do if it does happen!
Having a reserve fund that you have been squirreling away can help to support you in times of financial strain. try to save at least 10% of your income each month, 20% if possible. Even having one month's worth of expenses saved up can take the immediate pressure off if something happened to you.
While compassionate truck accident attorneys can help you put a claim in against a truck driver, this will take time, and even the smallest savings fund can be of use when you are unable to work. For example, say after that road traffic collision you needed to take 3 weeks off work. Would you get paid for this time?
Financial events such as house improvements, scheduled medical treatments, holiday expenditures, and vacations are expenses that should be anticipated throughout the year. These expenses can take a toll on your wallet, but with sound budgeting and money-saving habits, you can spend with confidence.
Once you've eliminated the element of surprise from predicted annual spending, you've already enhanced your monthly income and expenditures. While a budget is typically thought of as a monthly blueprint for your finances, do not hesitate to plan farther ahead, which can be especially beneficial when your income is uncertain. By planning for the foreseeable, you increase your chances of avoiding financial calamity if something truly unexpected occurs.
Protect Your Assets
You work tirelessly throughout your life to grow and build your assets and money. Building a nest egg takes time, so safeguarding your assets is just as critical, especially when the unexpected occurs.
If you have valuable personal things or collections, such as a wine collection or other collectibles, you can insure them to avoid paying out of pocket if they are damaged or destroyed.
Not only will homeowners insurance and life insurance secure what you've fought so hard for, but they'll also assist ensure your family's financial security in the event you're no longer around. If you want extra protection, you can cover for accidents and disability at work, so in the event you are unable to work via one of these options, you can support yourself with a payout.
Income protection can payout a percentage of your full-time wage if you cannot work for long periods. Even if this pays your essential bills and mortgage or rent, it is one less bill to worry about.
Diversify Your Income
To improve your savings capacity, one of two things must occur: either reducing your expenses or raising your income. Increase your income in various ways, including taking on part-time work or beginning a side hustle, requesting a raise from your present company, looking for a new job with higher compensation, or starting your own business.
While starting a business or side hustle is not for everyone, increasing your wage through a work change may be a far more feasible option. Bear in mind that current research indicates that staying in the same employment for an extended period of time likely limits your earning potential.
The extra income you generate can then be used as a support buffer in the event of emergencies.
Protecting your income can look like different things to different people, and not everyone has the option to save a large lump sum each month. However, starting small can help you improve your finances and work towards a bigger goal to give you peace of mind that you will be ok if the unexpected happens. Even if just for a short while.
Author - Chris
Author, Editor, Creator of Learn Develop Live