Preparing Yourself for the Unexpected: Are You Set-up to Handle it?!

Key Takeaways

Having an emergency fund in place transforms unexpected expenses from panic-inducing crises into manageable, and a lot less stressful, situations.
Fund yourself first, before aggressively paying off debt. Accessible cash prevents you from adding more debt when the inevitable emergency strikes.
Know your insurance coverage details and how much it will cost you to engage them, so you can act quickly and confidently when the unexpected arises.

How prepared are you?

Picture this: it’s the end of a loooong work day. It’s also (of course!) one of those hottest days approaching the end of summer. You’re so ready to get to that refreshing beverage with a friend after work. Instead…you get out to your car and you find it all smashed in on one side (!!!). The driver’s side door is pushed in, and doesn’t open very far; your side-mirror is dangling off against the door. The front quarter panel is all smooshed. This was me.

I took a deep breath. And I felt…ok?

I knew I was prepared. I knew where to turn. I knew it would be taken care of. I had an idea of what it would cost me out-of-pocket.

It still sucked. And, I took a deep breath and got to handling the situation.

First questions to ask yourself when the unexpected (inevitably) arises

Do I have insurance for this?

What kind of coverage do I actually have?

What are my out-of-pocket costs to even engage insurance?

And, in other situations not covered by insurance…

How will I pay for this expense, specifically, what account will I use?

How long will it take for me to access those funds from that account?

Do I have a plan in place in order to go about replenishing my Emergency Fund?

Protecting yourself, where to start

Fund yourself first. It may seem counterintuitive, but it’s most impactful to fund yourself before paying off debt. Having a fund of accessible cash designed to use in tough times (check out online High Yield Savings Accounts for some of the best rates!) will offer two things: it will give you that peace of mind that you can cover yourself when the unexpected happens, and it actually keeps you from turning to credit cards–thus, saving you from incurring even more debt.

Start with the basics. Open the account and set up a monthly automatic contribution that you can actually afford right now. This can be a small amount! Think about if your paychecks stopped coming. How much would you need to pay your minimum bills? Find that number and multiply it by at least 3. This will ensure you can pay your bills for 3 months if you had no other money coming in.

Once the account is funded to at least 3 months, turn towards your highest interest credit card or lowest balance and come up with your own debt pay-off strategy. You got this!

FAQ’s

What should I consider when thinking about opening a High Yield Savings Account?

To save time on admin tasks and learning a new online banking system, check the accounts available were you already bank. Secondly, make sure your money is safe and insured. This means checking that the account is insured by either the FDIC (for large banking institutions) or the NCUA (for credit unions). Finally, and especially if you open a new account at a separate institution, find out what the transfer time will be between where the money is coming from and your bank. You want to know how long it will take you to access your money on nights, weekends and holidays.

How do I know how much to save in my High Yield Savings Account if my income varies?

Get an idea of your basic monthly expenses, or “needs”, and that will be your baseline of how much you’ll need in the account just to get by. You can save up a few months worth by starting slowly and sustainably for your budget, and then increase the amount when you’re in your higher income earning months. Automation is best, by setting up the lowest amount of recurring transfers you can actually afford during your slower months.

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