Financial emergencies occur at any moment and are almost unavoidable. Whenever an emergency occurs, it can be very catastrophic. However, engaging in financial planning helps to minimize the devastation. Below are four types of financial planning we can do for an emergency.
Set up an Emergency Fund
During periods of steady income flow, it is wise to set up an accessible savings account and deposit emergency funds. You should make an effort to deposit a certain amount of money consistently into the savings account. This action helps you to stock up enough money, which will keep you afloat when a financial crisis occurs. If dealing with real estate, an estate planning attorney comes in handy. You can’t predict your health status, and it’s vital to have everything go as planned.
Having an outstanding debt can be extremely stressful, especially during a financial emergency. The reason for this is that the little income you receive during a crisis may not be sufficient to cater for the loan and cater for your basic needs. Therefore, it is always wise to avoid debt where possible.
Another reason for avoiding debt is that during a crisis, you have access to credit. This access is very beneficial, especially when you need a supplement amount of money to manage the emergency.
Maintain a Good Credit Score
When your financial circumstances become e helpless, you may need to loan money from a financial institution. A good credit score comes in handy when such a situation occurs. This is because it is a prerequisite requirement for financial institutions to loan you money at a reasonable rate.
A good credit score will give you access to affordable financing from any institution. You can then use this financing to sort out your emergency and then repay the loan afterward.
Minimize Your Monthly Expenses
Keeping your expenses low helps you save a lot of money. You may then deposit this money in an accessible savings account to act as an emergency fund. Another reason for keeping expenses low is that it frees some finances, which you may use to pay off existing loans. These loans might be a house mortgage, student loan, or a car loan.
Paying off such loans makes it easier to deal with a financial crisis since it reduces stress and worry. It also makes sure that we do not become overwhelmed by all the bills.
When it comes to dealing with financial emergencies, prior planning is the key element. Without it, we may stand to lose everything. Therefore it is wise to follow the above plans to reduce the impact of an unexpected crisis.
Emma Sturgis is a freelance writer based out of Boston, MA. She writes most often on health and education. When not writing, she enjoys reading and watching film noir. Say hi on Twitter @EmmaSturgis2
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