Although disaster can hit your bank account on a moment’s notice, there are some emergencies you can prepare for.
Big or small, financial crises will strain paying your bills and saving for retirement. And while you should have between six months to a year’s income saved up in an emergency fund, the repercussions from the following five financial disasters can be minimized if you take a few precautionary measures.
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1. Stock Market Losses. Stocks can tank but having a diverse portfolio ensures that if one security drops, others will stay safe. Don’t invest in a one type of industry. Spread your investments around.
2. Loan Default. Debt is going to happen, be it from credit cards or student loans. But to prevent default, make sure you’re limiting your charges. Live within your means and use a budget to figure out a month-by-month plan of payments that works for you.
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3. Natural Disaster. Experts say Hurricane Sandy was just a preview. With a slew of tragic natural disasters in recent memory, such as Joplin, Missouri’s devastating tornado in 2011, you need to plan for the unexpected. Insurance is a must for all of your most valuable assets, such as your house and car. Also, consider flood or earthquake insurance if your region is prone to these kinds of dangers. You just don’t know what will happen. And although insurance can be expensive, you’ll save in the long run if you need to pay out of pocket for expensive fixes to problems like flooding. The chance is worth the monthly payments.
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4. Not Saving For Retirement. Start saving for retirement as early as possible. The later you start, the less you’ll have to save. But if you get a late start, you still have some options, like putting away as much as possible in IRAs and 401(k)s. The Internal Revenue Service allows you to put more maximum in these types of retirement accounts because it knows you’re in savings crunch time.
5. High gas prices. You may think this pales in comparison to the other financial disasters but with rising gas prices, and daily commutes to work, gas costs add up. Choosing a car that is a hybrid could save you thousands. But if you have access, public transportation is the best answer.
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