2020’s Biggest Lesson-How to Prepare for the Unexpected
If 2020 has reminded us of anything, it’s that life is full of the unexpected.
From toilet paper shortages and mask-wearing to remote learning and job loss, the past few months have brought many challenges that we would never have dreamed about on New Year’s Eve 2019. But while we can’t predict everything that life will throw at us, we can adopt a more proactive mindset to be more resilient in the face of sudden change. Here are a few steps to take for a more prepared 2021!
Take Stock of Your Existing Preparations
Chances are, you already have some type of structure in place to help you deal with the unexpected—anything from a “rainy day” fund to a fire escape plan for your family. The New Year is a great time to revisit those structures and see how they’re holding up.
Maybe holiday shopping put your savings plan on hold. Maybe you’ve used up all the batteries in your emergency kit and need to replenish your stock. Checking in on your emergency plans regularly can help ensure that you will actually be prepared should you need to use them.
And if you don’t have any of these structures in place? There’s no better time to start!
Build an Emergency Fund
Knowing that you have savings to fall back on can take a lot of the stress out of an unexpected change like job loss or long-term illness. In that light, starting an emergency fund is one of the most important things you can do!
A strong emergency fund should cover at least three to six months (and ideally a full year) of your standard living expenses. These include critical expenses like your rent or mortgage, car payment, groceries, electricity and Internet, and childcare. Your emergency fund should also be relatively liquid, like a high-interest savings account, so that you can access it quickly when you need it.
To start an emergency fund, determine a set percentage of your monthly take-home pay that you can dedicate to your fund. Create a savings or checking account that is entirely separate from your existing accounts; this will help reduce any temptation to dip into your fund for non-emergency purposes. Set up automatic deposits to make growing your emergency fund a true no-brainer!
Set Bite-Sized Goals
Maybe you’ve heard the old adage: How do you eat an elephant? One bite at a time.
For many Americans, the idea of saving a full year’s worth of living expenses can seem daunting, if not downright impossible. But don’t be discouraged! Start by setting smaller targets, like saving $500 or $1,000. Focusing on goals that feel more realistic and achievable will keep your motivation high.
Invest in Insurance
While insurance might seem like just another monthly bill, it’s actually vital to your (and your family’s) long-term financial wellness. A car accident, a fall down the stairs, a house fire—just one unexpected event can spell financial trouble if you don’t have a safety net. Make sure you have adequate health, renter’s or homeowner’s, and car insurance to protect yourself.
It’s also important to invest in life insurance, especially if you are your family’s primary breadwinner. Select a policy with enough benefits to cover funeral costs, pay off any debts, and help cover education costs if you have children.
Think About Your “Worst Case” Budget
You probably already have some type of budget in place to manage your expenses and make sure you aren’t overspending. If you’re faced with a financial loss, however, that budget will very likely need to change.
You can be proactive by creating a “worst case” budget. This should be a bare-bones spending plan that covers your essential costs but cuts back on things you could do without if you had to—things like ordering take-out, using multiple streaming services, or getting a monthly subscription box for clothes. Having a stricter budget already planned will make it easier to put in place if you need it.
Plan for Non-Financial Disasters
Unexpected change doesn’t just come in the form of financial loss. Storms, forest fires, earthquakes, and other natural or manmade disasters pose a risk as well.
Create an emergency kit to have on hand in your home or car. This can include enough food and water for several days, blankets, a first-aid kit, an extra phone charger, a flashlight and batteries, prescription medications, and personal hygiene items. You should also keep a small amount of cash handy, as well as an up-to-date list of important contact numbers.
You should also discuss an evacuation plan with your family in case you need to leave your home quickly. This plan should cover escape routes, a buddy system for older children, and a designated meeting point in case you get separated. Finally, try to keep at least half a tank of gas in your car at all times, especially in stormy seasons, so you don’t find yourself stuck.
Get Advice from the Experts
No one likes to think about scary events like illness or job loss, but having a plan in place to handle these things can help take away some of the fear. And luckily there are experts who can help! Talk to your insurance provider to make sure your coverage levels fit your needs. Reach out to a financial advisor for help setting budgets and making investments; you can also get financial advice through your company’s EAP. Expert advice can help you rest easy knowing that you and your family are prepared for whatever 2021 throws your way.
WORKPLACE SOLUTIONS is a group of dedicated professionals who provide assistance and resources to individuals and families to create a satisfying and meaningful life. We’re counselors, attorneys, financial professionals, and experienced specialists in a wide variety of fields. Because life’s challenges and opportunities show up in a range of different areas, we provide assistance in a number of different ways.