The following is a guest post.
If recent news has taught us anything, it’s that our country needs to be more careful with money and manage its finances better.
When a private citizen experiences a financial crisis, its only a big deal to that citizen and their family, but when an entire government body has a financial crisis, the entire world finds out.
But a crisis is a crisis no matter who knows or who it happens to. Having several safety nets like insurance is a good way to soften financial blows. Here are a few tips to help you avoid your own financial meltdown.
Table of Contents
Show Debt The Door!
The first step that you’ll want to take to stay out of a financial quagmire is to stay out of debt as much as you can. This mainly applies to unproductive debt like credit cards since there are some debts such as mortgage and students loans that can be justified. Owning a credit card is one of the easiest ways to rack up thousands and thousands of dollars of debt in a short amount of time.
Having a credit card is like having money that you don’t have to buy things that you don’t need and can’t afford. Either get rid of your credit cards, or try to pay it off every month and avoid interest fees.
Ensure to Intelligently Insure
Having insurance is an excellent way to avoid massive unexpected expenses. Your car doesn’t wait for you to get paid to break down, and neither does your body. That’s why it’s a good idea to have life insurance or auto coverage.
Although sometimes it may feel as if it’s a waste of money, when you do need coverage you’ll be glad that you have it. Insurance doesn’t have to be expensive, getting a cheap car insurance can do just as good of a job as long as your personal needs are covered.
Start Systematically Saving
Another great idea is to start an emergency fund. Even though a savings account is one of the essentials of avoiding financial ruin, many people still don’t have one or don’t have enough in their savings account. If a major and unfortunate event occurs such as you losing your job or being in an accident that leaves you unable to work, you’ll want to have money saved up to fall back on.
A good rule of thumb is to have at least three months saved up to cover living expenses, but don’t be afraid to increase that to six months or even a year. There’s no such thing as having too much in your savings account.
Investing is also a great way to avoid a financial crisis. Making smart investments is a better way to compound your money over the years. The more time you have to invest the bigger your return will be. Invest not only in the market, but with intelligent purchases as well such as cheap insurance, owning a house, and other purchases that will either save you or bring in money in the long-term.
There are all kinds of ways to experience a financial crisis. Loss of job, major health complications, death, car accidents and more can yank us from the top of the mountain and smash us against the rocks. With proper preparation, foresight and wise investments such as health insurance, the blow will be lessened and that much more bearable. What tips do you have for avoiding a personal financial crisis?