When we plan for our financial future, most of us factor in a slightly more realistic version of the best-case scenario. We plan to have a job most of our lives and then retire, with no catastrophic emergencies. So, what’s the backup plan?
Photo by A McLin.
A common strategy is to have a small emergency fund for that unexpected car repair or huge bill. We don’t (or in most cases, can’t) set aside an extra $500,000 in case a loved when needs some expensive medical procedures. While you can’t put aside a dollar amount for every bad thing that could happen, finance blog Once Cent at a Time suggests at least being aware of what could happen:
Back up financial plans should center around insurance, beneficiary, nominee and alternative investment or saving options. An ideal and fool proof backup plan should also consider option for alternate employment in case of job loss. Most importantly, backup financial plan should be in writing.
In computer document or on a piece of paper, write down the various financial disorders that you may face (like the one I listed above). Then write down the backup plan against each of such items. Make sure you have insurance coverage that can cover your self, your family, your vehicles and your health.
As they point out, insurance is, by definition, a form of backup plan, but other plans include knowing where you’ll seek employment if you lose your job, or if your work becomes unnecessary (which technology has a nasty habit of doing to a lot of fields lately). What about you? Do you have separate financial plans in place for different types of tragedies? Is your emergency fund enough for you? Or do you prefer to take things as they come?
Having a Financial Backup Plan [One Cent at a Time]
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