Personal Finance Tips: Prepare for Financial Emergencies

Preparing for a financial emergency is often a difficult thing to do. Many people simply don’t even think about what could happen, since they live day to day trying to achieve it. However, having an emergency plan will help prevent problems when something does happen. An emergency situation can cause big problems when you don’t have the finances to handle it.

Few of us think about what would happen if we lost our jobs or suddenly became too sick to work. The thought is simply too terrible to contemplate in many cases, especially if we are living paycheck to paycheck with a job as it is.

The fact is, however, that financial emergencies happen to almost everyone at some point and can have a devastating impact on your credit. In fact, most people who file for bankruptcy do so because of a major financial disaster, such as sudden unemployment, huge medical bills, a lawsuit, or a divorce. Despite this, few people plan for these problems, although they can happen to anyone.

If you want to keep your credit score in good standing, you need to know exactly what you would do in an emergency. Developing an actual written plan can help you by allowing you to take steps to save your credit as soon as an emergency strikes. Some items that could be in your financial emergency plan could include:

1) A list of all the assets you could liquidate if you had to.

2) A list of all the extras or luxuries you could cut out of your life right away if there was a problem (ie newspaper subscriptions, cable TV, water delivery service, Friday night at the movies).

3) A list of resources you have that could help you in an emergency. Perhaps you know of an attorney who deals with the financial aspects of the law. Maybe you have insurance that can help you. Your employer may offer you a severance package. Whatever it is, write it down. Keeping a list of these resources will make it easier to access them in case of an emergency.

4) Other ways you could get money if you had to: jobs you could take, things you could rent to others.

The bottom line is to make a plan. You need something in place so that when disaster strikes you can handle it without falling into a financial crisis. You’ll be stressed enough worrying about the emergency situation that finances don’t need to drag you down as well.

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