It can be difficult to maintain a healthy financial standing at the best of times, but when disaster strikes? Then it’s even more challenging. With 67% of Americans living paycheck-to-paycheck, even minor blips can make it difficult to keep one’s head above water.
And they’re the minor blips. That life is full of surprises is usually presented as one of its virtues, but from a financial point of view, it’s likely the opposite. You’re more likely to experience a bank-account-draining life event than you are to find a winning lottery ticket on the floor.
You can’t always prevent major life events from happening to you, but you can prepare as if they will happen and take the right steps should they occur. In this post, we’ll outline some life events that could ruin your finances, but don’t necessarily need to.
Sudden Loss of Income
Most people are comfortable with their financial situation because they know that there’s money coming in. But what if that money stops coming in? Some 950,000 jobs have been cut in the US this year alone, which means there are nearly a million people who have suddenly found themselves without work.
Even if you perceive that your job is secure, it’s better to be safe than sorry. Building an emergency fund equivalent to 6 – 12 months of living expenses can provide a highly welcome financial buffer should the unthinkable happen.
Severe Injury
Most people underestimate just how much they rely on their bodies to earn an income. Even if the real value is your brain, your limbs will still play a huge role. An unexpected injury can impact your ability to work well (or even at all) and can also incur other costly expenses, such as high medical bills. While you should have one eye on recovery, the other eye should be on preserving your financial situation. If the injury wasn’t your fault, then working with a team of experienced personal injury attorneys can help you to fight for the financial compensation that you deserve. It’s also recommended to begin the process of claiming benefits — such as disability benefits — as soon as possible, since they can take a few months to be approved.
Divorce
People tend to think that divorce is the inevitable end of a broken relationship, and is thus pretty well known by both parties before it happens. That’s not always the case. Out of the blue divorces happen too, and when they do, it can have a traumatic impact on the person’s financial health just as much as it does on their emotional well-being. Having your own emergency fund can help manage the initial costs. On a longer-term basis, it’s recommended to work with a divorce attorney to fight for any financial support you may be entitled to.
Having Children
Finally, there’s having children. It’s a joyous moment, but also expensive — today, the average cost of raising a child is more than $21,500 a year. The bottom line? If you’re even thinking of having kids, then start putting money away now.
