The COVID-19 pandemic has revived the conversation about financial preparedness. Plenty of people thought they had enough and came up short just weeks into the pandemic. Others worried they couldn’t make it but discovered that their financial planning enabled them to make it through months of uncertainty.
After you’ve meticulously worked on your finances in the past year, you might be wondering how you’ll manage should the pandemic take a turn for the worse. Can you sustain your lifestyle, or will you be forced to take drastic (and often embarrassing) actions to ensure your survival? Sometimes, it’s difficult to check from where you stand. This is why you must use an objective lens in diagnosing your financial health. This way, you can determine without bias how prepared you are for emergencies.
Fortunately, when checked off your list. Here are four signs from our financial expert content partners prove that you’re in better shape to handle emergencies than you might’ve expected.
You’ve Built Up Your Emergency Fund
It’s not enough that you’ve set aside an emergency fund. You have to build it up to an amount that can cover the most common emergencies you might face. This includes hospitalization, job loss, unplanned but necessary travels, and any unforeseen incident. Anything you could’ve anticipated doesn’t count, like your bills, an upcoming birthday, or renovation you’ve been planning for months.
While there may be no guaranteed formula to come up with a sum that will suffice for every emergency, you can consider the most likely and expensive ones in your computation. Job loss is one of the most serious risks people face, compelling them to aim for an amount to cover their living expenses for six to eight months without income. If you do the math now and find that your current emergency funds will be enough to provide for you within that time span, then it’s safe to say that you’re on the right track.
You’ve Signed Up for the Right Insurance
Insurance is a lifesaver, and it’s important to not only have one but to make sure that yours provide sufficient coverage. This is true for insurance that applies to your person and your property. Consider your life and health insurance for a moment and whether you’re investing in the correct monthly premium.
If you’re a homeowner, are you covered by the right homeowners’ insurance? This is important if you live in an area that experiences frequent storms and hurricanes. Owning insurance that can cover damages to your property and any harm to your person will spare you from financial and emotional burden while recovering. As such, ticking this off your list means you’re in a good place to face emergencies.
Do you have car insurance? Check our partner, Branch Insurance, to see if you are getting a great rate with the right coverages for your needs.
Your Credit Score Is Good
The goal of an emergency fund and insurance is that you won’t have to borrow to manage emergencies. That said, there’s no way to determine if the money you set aside will be enough. This is why it’s always a good idea to maintain a good credit standing, as it gives you the borrowing opportunities you need in case you’re left with no choice.
If you’ve been paying off your credit card debts and other bank loans on time, you’ve already taken the first steps to build an impressive credit score. Checking this off your list is a good feeling because it’s a sure sign that you have Plan B to fall back on if Plan A falls short.
You’re Meeting All Your Financial Goals
Financial preparedness can be assessed not only by how much you’ve set aside and how much you can borrow. It’s a must that you take a look at your financial goals to determine whether you’re meeting each one of them. Balanced financial goals usually include sinking funds for anticipated expenses, monthly budgets, and other allocations for big and small payments you’ll be making. If the answer is yes, that means you’ve covered your bases, and you’re not in danger of orchestrating your own emergency.
You Have More than One Income Source
Financial preparedness also means reducing risks to your financial health. You can do this by having more than one source of income. This could mean endeavoring in a side hustle, starting a business, or investing in stocks. Diversifying your sources reduces the risks of touching your emergency funds or borrowing due to a lack of foresight. If you lose one job, then you can rely on your side hustle to produce at least half of the income you used to earn while you’re looking for new career opportunities.
Emergencies can come at any time, and they can be scary. The good news is that if you read this list and discover you’re doing well in all four aspects, then you can rest assured that your finances can take a blow and still survive.