The feeling of dread when you hear your car making a strange noise or sitting in the Emergency Room with your kid and possible broken arm wondering how you are going to pay for the bill that is coming. When you have steady employment, these bumps in the road are stressful but are usually not tragic. Add loss of a job or several of these unplanned expenses and you can find yourself in a financial emergency. According to CNN Money you may be like 1 in 4 Americans that have no emergency fund to help cover these unexpected expenses and consequently you will end up taking on more debt or filing for bankruptcy because of a financial emergency.
Like planning for natural disasters, a financial plan is essential to help smooth out these bumps when they happen. The first step is to identify what life events could cause a financial emergency in your life. Below is a list of possible life events that could cause a financial emergency.
- Loss of a Job or Pay Cut
- Medical Emergency
- Identity Theft or Fraudulent Activity
- Housing Crisis
- Vehicle Emergency
- Unexpected Travel
- Death in the Family
- Sudden Move
- Birth or Adoption of a Child
- Natural Disaster
Once you have identified items that could cause you to have a financial emergency
. Identify what tool(s) are available to help you for that situation. Tools that can be in place to help in a financial emergency include:
- Emergency Fund (recommended three to six months of expenses click here for more information from TheBalance.com)
- Insurance (House, Car, Renters, Disability, Identity, Life, Homeowner Loan)
- Legal Documents (Will, Living Will, Power of Attorney)
- Non-Profit Organizations (Know A Vet?, Salvation Army, VFW, Red Cross, 211.org, Local Nonprofits)
- Employer Assistance Plans/Human Resource Department
- Community Outreach (Free bulletin boards, religious organizations)
- Government Assistance (VA, National Resource Directory, Unemployment, Benefits.gov)
These tools can offer peace of mind when financial emergencies come up but take time and planning to implement, reach out to a financial planner or financial coach to help you create your financial emergency plan. Click here to find a financial planner or click here to find financial coach.
Action Steps when an Emergency happens:
The first step is to review your financial plan and tools that are available for your specific emergency. After reviewing your financial plan, review or a create a budget to help cut expenses to free up income and identify other sources of income such as insurance policies or side hustles. For additional information on budgeting during a financial emergency, read Dave Ramsey’s article Budgeting After a Job Loss that walks you through the steps of budgeting after a job loss. Some of these steps can also be applied to other financial emergencies.
If the emergency could be covered or partially covered by an insurance policy review the claim section of your policy or contact your insurance agent to review what is required and what is covered before submitting a claim.
Other people and organizations that can offer help are your human resource or benefits department where you work, unemployment office, financial planner or coach, and religious leaders.
Help keep the stress under control by talking to a family member or close friend. They can help keep you grounded and may provide you a solution you did not see or just a place to vent. Keeping kids appropriately informed and secure during an emergency can bring your family together and teach your children how to handle emergencies. Click here to read the article from SmartAboutMoney.org on how to include and teach kids during a financial emergency.
Watch for future articles from Know A Vet? that will discuss financial options specific to Senior Veterans, spouses and dependents.