You never know when you’ll be faced by an emergency, be it on the health front or on the financial front. It is ever important to have contingencies and plan Bs if someday things don’t go according to your expectations. You should always be well prepared if you happen to lose your job suddenly or are faced with a problem health wise, and still be able to live with you head held high and the pride intact. It is always a good idea to set some money aside as insurance so that your boat does not sink if you’re in a tough predicament.
Plan for emergencies
The federal reserve had conducted a survey and the subject was the financial stability of American people in the year 2015. The results were quite surprising as about 18% had to face some problem on the financial front and a major portion of that fraction did not have the know-how or resources which could get them out of that tricky situation. A lot of them were unable to bounce back and even skipped the medical routines which they needed and still slipped into a lot of debt and had to disturb their retirement funds. About half of those numbers had enough saved cash which could take care of their survival expenses for three months which comprised of situations with ill health, unemployment or disability. The rest would be compelled to borrow money or even need to sell of their assets just to get themselves through this tough time.
How much should you save?
There a lot of different sources of advice and a little birdie might have told you that about three to sixth months of expenditure must be saved up and kept aside. But there may not be such a hard and fast rule and is a very malleable amount which is bound to change based on any family’s status. The amount that you expect to need to cover living costs on basic amenities like insurance, house charges, food, utilities and transportation for a duration of six months can always be taken as a benchmark to keep saved and used whenever you are faced with a crisis. Luxury expenditure must be avoided at such times and may not even be saved for. The stability of your income might also be a good criteria based on which you decide how much to save for. A freelancer might need a bigger emergency fund than a well-established investment banker does, for obvious reasons.
Disability Income Insurance
If you think about it now, you may feel that it is a completely unnecessary type of saving as you are fit and fine currently with your body showing no sign of fatigue. But there have been studies which estimate that more than one-fourth of those in their 20s might develop disability of some form till they reach their 60s. There are short term and long term disability insurances available which can be chosen.