Life happens. Unexpected incidents, whether good or bad, can arise at any time and put our finances to the test.
Maybe your company is struggling and you get laid off. Maybe you suffer an injury on the job and have to take a leave of absence. Or you’re faced with a sudden health issue…
OR maybe a string of good, but pricey changes happen. The perfect house suddenly pops up on the market. You get promoted, but have to relocate. After years of trying, you are finally expecting a child…
When the unexpected happens, how strong is your safety net? Do you know? Would you be able to survive six months with no income? Three?
We often think that we’re immune to life’s little twists and turns. Or that we’ll “cross that bridge when we get to it.” But what if there is no bridge? What if you’re left standing on the brink of the river as the waters continue to rise and rise?
I, for one, would rather have my bridge built and ready to go!
When I advise my clients on building a safety net, I usually start with asking them about their current spending habits, as well as their current savings. That data helps determine how strong their safety net really is and how long they could weather a catastrophe. Fortunately, it’s easier than ever to track your spending with all the budget-tracking tools and apps available today (many of them free!).
Once you have several months of spending data compiled, take a look at your emergency fund. How many “rainy days” would you be able to last if your income stream was suddenly cut off?
This post isn’t meant to scare you! It’s meant to motivate you to spend smarter and increase your savings. If you’re having trouble knowing where to begin, start by trying these six easy steps, then get in touch with a financial planner to start putting together a more comprehensive plan.
- Limit your eating out to special occasions (and start bringing a brown bag lunch to work).
- Buy high-quality clothing that won’t wear out or go out of fashion anytime soon.
- Plan activities with your significant other or family that are free of cost (here are a few family-friendly ideas if you live around the Twin Cities).
- Track your spending and savings and develop a savings plan with your spouse.
- Allocate a certain amount of money to your savings account/emergency fund every month and then LEAVE IT ALONE.
- Don’t rely on your credit card to keep you afloat. If possible, paying off your credit card debt every month can significantly improve your financial situation.
Work on building a safety net that will keep you safe while you recover from unexpected major expenses. If you need help developing your plan, let me know!