March was the month for financial misfortunes in our home. We own two older vehicles because we prefer to have no car payment, and both broke down this month. One car can be fixed for a few hundred dollars. The other won’t be worth repairing since the cost to fix it is more than half of what it’s worth. My laptop also needs repaired at the tune of several hundred dollars after crashing for no reason. Even our toilet handle broke. I’ll just say that it was the icing on the cake.
I’ll be honest, I shed a few tears because it became too overwhelming. But looking at the big scope of things, I had to realize that our situation is temporary and that we’re still beyond blessed. It also made me look at our current situation and realize that being financial prepared alleviated a lot of the stress.
How to Prepare for a Financial Setback
Reduce your expenses
You can’t save money you don’t have. So before you start saving up for a rainy day, look at your cash flow and figure out which expenses you can trim from your budget. If you know that you’ll be need to replace a vehicle or make a major home repair in the future, kickstart your savings by selling excess clutter or creating a new income stream.
Check out these articles to help you get started:
- 7 Reasons You Keep Overspending
- 5 Steps to Creating a Budget
- Living On One Income-Taking Action
- How To Save Money When You’re Barely Surviving
Create an emergency fund
You need to create a plan and take action. This means creating a separate bank account to place your emergency savings. If you can make it an automatic deduction from your paycheck, do it. You won’t even miss it after a while and you won’t be tempted to spend it. We’re both self-employed, so once we pay ourselves to cover our business and personal expenses, I set aside money for our emergency savings.
Protect your assets
This is crucial for anyone that owns a home, cars or has a family. We never think that something could go wrong until it does. Keep your assets protected with the proper insurance coverage. I know it’s easy to go the frugal route when it comes to insurance coverage, but ensure that your current limits cover your assets in case of a disaster or accident.
Know where you stand financially
If you had to suddenly replace your home or vehicle, would you be able to obtain a loan? Find out where you stand financially and check your credit report at least once or twice a year. In the past, I have found errors in my credit report that I was not aware of. Even a simple mistake can greatly impact your credit score and prevent you from a loan approval. And with identity theft on the rise, it’s important to be in the loop and know what your overall financial picture looks like.
How do you prepare for unexpected emergencies? Please feel free to share your tips with the community!