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Money, or the lack of it, can ruin your life.
Sometimes, our financial future is within our control. Eating out less, skipping the fancy coffee on your way to work every day, and comparing service plans, like car insurance, can ensure you aren’t spending more money than you should.
The trouble is, a cup of coffee or spending a few more bucks on car insurance aren’t likely to ruin your finances. There are many unexpected things that can happen in the blink of an eye that can change your life, and not in a good way—if you aren’t prepared.
There’s only so much we can do because there’s really no way to know the future, but these five tips can help you prevent the worst from happening to your finances.
In This Post:
Make Sure You Have Disability and Life Insurance
Accidents can happen at any time, especially if you work under hazardous conditions. If an accident keeps you out of work for over 12 months, you may qualify for Social Security Disability Insurance. The trouble is, just because you technically qualify doesn’t mean you’ll get the benefits without a fight with help from an attorney. Not to mention, what are you supposed to do with reduced or no income for 12 months?
It’s not a bad idea to have a supplemental disability policy if an accident is a possibility at work. If you work in relatively safe conditions, you may not need disability insurance, but you should still have life insurance. That way, your family isn’t ruined should something happen to you.
Have and Understand Your Health Insurance
Healthcare costs are outrageous. You don’t want to find yourself in the hospital after an accident or with a serious illness without coverage. You should find a way to fit payments into your monthly budget.
Unfortunately, having coverage isn’t enough. If you don’t understand your coverage, you could end up paying a lot more than you bargained for.
Get started understanding your insurance policy by getting familiar with these terms:
- Deductible is the money you owe before your insurance company will pay.
- Copayment is the standard payment you will pay for receiving a medical service.
- Coinsurance is your share of the covered healthcare services, which is usually a percentage.
- Premium is the amount you pay to be insured every month.
- Network is comprised of the doctors, hospitals, and suppliers that are covered under your policy.
Pay Yourself First
Many people make the mistake of paying for things they need and want first, then setting aside whatever is left in a savings account. This will leave you with a wimpy emergency fund, which is something you need, should you lose your job or your family experiences a financial emergency.
Instead, you should always pay yourself first. Of course, make sure your bills are paid, but by setting aside money before you go out to eat or buy new clothes for the kids, you’ll ensure you don’t overspend.
Don’t Spend Money You Don’t Have
Our society makes it easy to spend money you don’t have. From credit cards to loans, it’s easy to get funds when you don’t have any.
In some cases, this may be necessary, as is the case with a college education or a car. There are plenty of other situations where you shouldn’t spend money you don’t have.
Don’t use a credit card unless you can pay off the card right away, and never spend money before you get it. For example, you shouldn’t take a vacation before your tax refund arrives, as you may discover you’re the victim of identity theft, and it will take months for you to get your money.
Avoid Lifestyle Creep
Lifestyle creep involves an expectation of an increasing quality of life so that even if you get that raise at work in your 30’s, it still feels like you’re a struggling college student.
Some things can’t be helped, like childcare, but some things definitely can. Your biweekly trip to the nail salon isn’t a necessity, and neither is eating out for lunch every day of the week. Create a budget and stick to it. You’ll be less likely to keep spending as your income increases.
Life often has other plans than we expect. Don’t let them catch you unawares and cause your family’s finances to crash. Do what you can right now to prepare for the unknown with the tips on this list so you aren’t ruined if the worst happens.