Life brings unexpected things, and sometimes that means stress and extra expenses. How do you prepare for the inevitable? Amy Sola, of Associated Bank, offers a few ideas to protect yourself.
By Amy Sola, Associated Bank
Life is full of surprises. Thankfully, most of those surprises are of the happy kind, like finding your dream home, expanding your family or receiving an inheritance. Things like losing a job, having a car break down, being hit with unexpected home repair bills, suffering through a market downturn or even living through a global pandemic can be devastating.
While it’s not possible to avoid these situations entirely, taking steps to protect yourself financially can eliminate many of the headaches and hardships associated with emergencies.
The key to financial wellness is creating – and sticking to – a budget. A budget is a map that will guide you on your day-to-day financial journey. It will help you make sure you have enough money to meet your financial obligations and can help you save money over a long period of time.
By living within your means using a detailed budget, you’ll avoid accruing unnecessary debt. That way, when the unexpected does occur, you won’t have to worry about a large monthly debt payment, allowing you to focus on the situation at hand.
Creating a budget can also help you avoid emergency situations. For example, if you know there’s a large expense on the horizon, like replacing an aging furnace, putting on a new roof or buying a new vehicle, a budget can help you create a “sinking fund” to pay for those expenses.
To create a sinking fund, estimate the total amount of your large upcoming expenses, and divide up the total cost monthly, or even bi-weekly. By saving that amount each month, or every two weeks, you’ll be ready to pay for it when the time comes.
There’s no better way to prepare for the unexpected than with an emergency fund. Without an emergency fund, small expenses can push even the most budget-conscious people over the edge, tightening finances for weeks or even months. But with an emergency fund, those expenses change from hair-on-fire emergencies to simple inconveniences.
There’s no correct amount to have in an emergency fund. It comes down to your appetite for risk, your broader financial picture and how much you feel you can comfortably save in any given month.
Insurance is a product specifically made for the unexpected. There are many types of insurance, including life insurance, health insurance and long-term care insurance.
If you’re wondering what insurance is right for you, ask your wealth manager or a trusted insurance agent.
Preparing for the unexpected isn’t always straightforward. It takes a comprehensive, personalized approach.
Amy Sola is a certified wealth strategist and vice president of private banking at Associated Bank, Wisconsin’s largest bank holding company with branch services throughout the Midwest.