Surviving a financial emergency: What it would take?
Be it a financial emergency caused by environmental factors like forest fire or floods, or a more common crisis like unemployment, unexpected emergencies do happen. The worst is that they usually happen unexpectedly. It is indeed desirable that you need not ever face such a financial situation. However, in case you do, the best way to manage is to be prepared. This requires you to have a well thought emergency plan to minimize any potential risk, which will include an emergency savings fund. The Accounting and Tax bring you best finance tips from our financial consultants in Canada. So let us see how you can go about surviving a major financial crisis:
Getting Through the First 72 Hours
In the opinion of most experts with a major catastrophe, the first 72 hours are critical. Over this time you may need to be self-sufficient and have your own food, water, and resources on hand until help arrives. In case you are compelled to leave your home or area for safety reasons you may not have a lot of advance warning. It is best to have a plan in place and knowing what to do and what to take with you will be a big help if you must leave in a hurry. The Public Safety Canada has developed an Emergency preparedness guide which you need to go through.
Determining the Amount of Emergency Savings in Hand
In the opinion of some financial experts, they recommend having the equivalent of a minimum of three and preferably six months of living expenses set aside in a separate savings account for a financial emergency. In case you happen to be a homeowner and have a mortgage, you need to work towards having a savings goal of a minimum of six months of living expenses. This will assist you to get through the emergency and minimize the possibility of having to sell your home out of necessity.
You must put your Emergency Savings Plan in Action
Often you may think it is impossible to save six months of living expenses. This is especially if you are paying down your debt. In practicality, it may only be possible for you to save up the equivalent of one-half or one month’s emergency savings each year until you have paid out your debt in full. However what is more important is that you work towards that financial goal.
Open a Separate Bank Account for Your Emergency Savings
One of the best ways to reach your savings goal for your emergency savings account is to put your goal on auto-pilot. You could open a separate savings bank account for your Emergency fund and transfer funds regularly to build up the same. This will help you to monitor and plan better.
Other Tips you could consider While Making your Emergency Plan
- You need to review your insurance coverage. Ensure you have sufficient coverage.
- You must temporarily lower personal loan or line of credit payments to interest only status if you happen to be facing a financial emergency.
- One needs to review one’s plan and savings regularly to ensure one is on track with your goal and adjust accordingly when the circumstances change.
- Counsel with a reliable financial expert to assess your financial situation. They can be the best guide for you to handle your emergency situation, instead of trying to do all by yourself.
In conclusion, we can say that any financial challenge or crisis may hit you at any point of time of your life. The best way to handle such a situation is to be prepared for it. We hope that the steps mentioned above will help you ride over the same in case you happen to face one.
