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3 Tips to Be Financially Prepared

Posted September 15, 2014 by Kelley Long in Life After Five
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September is National Preparedness Month, which is part of the federal government’s ready.gov effort to make sure we’re all ready in case of another Katrina, 9/11 or something worse. One of the campaign’s suggestions is to prepare an Emergency Kit and I’ll be honest, reading the list freaks me out a little bit. But if heaven forbid you ever have to go through a disruptive event, being prepared to survive the literal or metaphorical storm is just the beginning. In addition to making your plan and building your kit, make sure you’re financially prepared so that you can bounce back once things go back to normal. Here are 3 tips to prepare yourself for any of life’s road bumps.

Have an emergency fund. I’ve said it a thousand times, but it bears repeating: squirreling at least 3 months expenses away in a separate savings account is a huge step toward being prepared for the worst. Not only will this fund help to keep you from freaking out if you lose your highest-paying client or usher you through a natural disaster that keeps you from working for weeks, just having it in place provides a peace of mind and a sense of freedom that I can’t describe.

Knowing that you’d have at least three months to get your act together should you lose your job, break your neck or lose your house in a tornado can help you to dream bigger and consider loftier possibilities for your life. It removes the, “I can’t afford it,” excuse from your road blocks and boosts confidence in your decisions. Don’t wait until you get some big pay-out or your credit cards are finally paid off – start this fund today, even if it’s with just $25 per paycheck. And don’t touch it, borrow from it, dip into it, think about it until it’s at that 3 months expenses balance. Just do it.

Protect yourself. Insurance is my least favorite way to spend money. But dang, it’s good to have when you need it. Make sure your health, car and home insurance are up to snuff with your needs. Cut-rate/barely legal insurance works when you’re driving a beater or still using hand-me-down furniture at home. But if your lifestyle has elevated to a nicer car and higher-end stuff, you also need better insurance.

I bought a used Mini Cooper this spring and I love him so much. Like, LOVE HIM. (yes, my car is a boy – Sheldon Cooper, if you must know) One of my favorite purchases ever. But I’ll admit, I cheaped out on insurance at first. Then I started to read reports of people stealing catalytic converters and keying cars in my neighborhood and I re-thought that decision. Adding comprehensive coverage with a $250 deductible to my policy didn’t raise my premium much but it totally helps me sleep better at night. Yes, if some jerk does a little work under my car or he floats away in a flood, it’ll cost me $250. But then that’s it. And that’s worth the additional insurance.

When it comes to health insurance, your best way to be prepared is to know how your policy works. If you have an HSA, then you have to pay out of pocket for a bit before any coverage kicks in. At least make sure there’s enough money in the account to cover a visit to the doctor if you get sick. Ideally, you’d be maxing out your savings in that account since you can let it ride indefinitely and interest is tax-free as long as you use the money for health expenses.

Know what you have and how to access it. If I asked you to show me all your account statements, including that old 401k from your first job, would you be able to whip the information together? And if you’re married, would you be able to do the same for your spouse? You should be checking in on all of your financial accounts at least once a year, but even if you’re not, it’s important to at least know what you have and where to find it, especially if you have a disaster happen. I keep a simple Excel spreadsheet that lists all my accounts and their balance on a monthly basis. Not only do I find it fun to watch my net worth grow (nerd alert!), it ensures that I can still log in to everything or that I’m still receiving the statements I’m supposed to receive. And if something ever happened to me, my family would know how to clean up my estate pretty easily.

While thinking about bad things happening is a bit of a downer, autumn is a good time to take a breather, assess how the year is going, and get some things organized if needed. The holiday madness will be here before you know it. Take the time now to be prepared for all things – you won’t regret it.

About the Author

Kelley Long

Kelley Long is a CPA/PFS and CFP® who believes that the true meaning of financial security means having choices in life. She uses her 15 years of experience in various financial services industry jobs to inform her work as a Resident Financial Planner for Financial Finesse, providing unbiased financial guidance through workplace financial wellness programs. She’s also a volunteer and media ambassador for Feed the Pig and 360 Degrees of Financial Literacy. In Kelley’s perfect world, everyone would feel great talking about their money concerns, fears, questions and problems, because then everyone would see that we ALL have those concerns, fears, questions and problems. Kelley lives in Chicago with her husband and their Himalayan cat Miles, where she also teaches BODYPUMP group fitness classes at the Chicago Athletic Clubs.