Read

How to Financially Prepare for the Unexpected

Creator:
Published:
January 8, 2024
August 24, 2020
Prepare for the unexpected by following these helpful tips.|Grotto quote graphic about how to prepare for the unexpected: "How to financially prepare for the unexpected: establish financial goals and work toward them, have a budget and know your numbers, work to become debt-free, make saving a priority, and prepare now for financial stability in the future."

The pandemic and its economic effects have hit hard. Now that we are cautiously in what might be considered a slow, slow rebound, individuals and families may be wondering how to better prepare financially for the unexpected.

There’s only so much you can do to prepare for what may or may not happen. And truthfully, it’s hard to imagine how any of us could have prepared for the full extent of COVID-19 and all it has entailed because it is such an unprecedented event.

But there are a few financial principles to keep in mind when life and finances are stable and going well in order to help better financially prepare for the unexpected.

Establish financial goals and work toward them

A solid way to alleviate fear of the uncertain is to have a plan. If you don’t already have a financial plan in place, consider outlining one for yourself if you’re single, or with your spouse if you’re married.

While things are stable and going well, what financial goals do you want to pursue? Being debt-free? Paying off your house or saving to buy a house? Investing a portion of your income? Saving for your kids’ college?

Part of establishing solid financial goals is having a budget and working toward paying off debts, which we’ll discuss below. But approach finances with a clear plan of where you are now, and where you want to be. You’ll have more confidence to adjust to changes and uncertainties when they arise if you’re grounded in your financial realities right now.

Have a budget and know your numbers

To prepare financially for the unexpected, create a budget and stick to it. Budgets may get a bad rap for being no fun or too rigid. But really, a budget can be a safety net, a guide, and a barometer all at once.

If you clearly outline what you’ll spend money on each month with the income you have to work with, you don’t have to worry about coming up short when the unexpected happens. In this way, a budget can act as a safety device to prevent you from spending your money as soon it deposits into your account. It can also guide you if the unexpected does happen and you need to make changes or adjustments to what you’re spending every month.

And a budget can serve as a barometer on your spending habits — if you’re spending more and more on eating out every month and that doesn’t fit into the plan you’ve outlined to reach your goals, you know there are changes to be made next month.

Work to become debt-free

Ridding yourself of all consumer debt (credit cards, car loans, student loans, etc.) will not only give you freedom to go after your financial goals, but it can also make dealing with the unexpected much easier. If incomes shift, if budgets get tight — or worse, you lose one income altogether — being debt-free means you’ll have fewer or even zero payments to make on debt every month.

There are many ways to work toward paying off debt, such as the debt snowball or by paying off high-interest loans first. But making this a goal you pursue with vigor during the stable and secure times will give you that much more freedom and flexibility when the unexpected does hit your finances.

Make saving a priority

And of course, the absolute best way to feel secure when the unexpected happens is to have a robust emergency savings fund. This is not the same as saving for a home, a car, or college education. This tip refers to creating a savings fund that is reserved only for emergencies.

Dave Ramsey often says that an emergency fund makes a crisis an inconvenience. And it makes sense: if you have a savings fund with enough money to cover three to six months of expenses, then a surprise medical bill or an unexpected but dire home repair will be an inconvenience, not a financial crisis.

And even more relevant to living in a time of pandemic, having a solid savings fund can help you bridge the gap during times when your income may be reduced, paused, or lost altogether. It can give you security as you work to replace that income.

Some financial experts recommend paying off all of your debt before saving aggressively, because it can be hard to accomplish two major financial goals at once and make any notable progress. But the important thing is to decide on an amount you’d like to have in an emergency savings fund, and then build up to that number to give yourself a cushion for the unexpected.

This may be a flat number you decide on, or you may want to calculate a few months of expenses and the amount you’d need to cover those in order to come up with a goal for your emergency savings fund. And remember, this is only for emergencies — it’s up to you or you and your spouse to determine what constitutes an emergency.

Prepare now for financial stability in the future

A budget, becoming debt-free, and a robust emergency savings fund can all help you approach the uncertain with peace of mind in your financial situation. When sailing is smooth, work toward financial goals that will set you up for success and security when the water gets rough.

Grotto quote graphic about how to prepare for the unexpected: "How to financially prepare for the unexpected: establish financial goals and work toward them, have a budget and know your numbers, work to become debt-free, make saving a priority, and prepare now for financial stability in the future."

Creators:
Sarah Coffey
Published:
January 8, 2024
August 24, 2020
On a related note...
Opening Up the STEM World to Girls of Color

Opening Up the STEM World to Girls of Color

Grotto

He Brews Beers and Community

He Brews Beers and Community

Grotto

"Point A"

"Point A"

Marjorie Maddox

My Service Work Changed How I Treat All People

My Service Work Changed How I Treat All People

Caleb Cobbin

7 Habits to Help You Take Charge of Your Life

7 Habits to Help You Take Charge of Your Life

Grotto

An Inside Look at Teaching Service Programs

An Inside Look at Teaching Service Programs

Mary Cunningham

Empowered Employment for Survivors of Sex Trafficking

Empowered Employment for Survivors of Sex Trafficking

Grotto

3 Ways to Fight Consumerism by Living Simply

3 Ways to Fight Consumerism by Living Simply

Julia Erdlen

4 Essentials for a Stand-Out Job Application

4 Essentials for a Stand-Out Job Application

Mariah Cressy

Breaking Boundaries: The Exciting Future of VR Innovation

Breaking Boundaries: The Exciting Future of VR Innovation

Grotto

Helping Students Achieve a Debt-Free Education

Helping Students Achieve a Debt-Free Education

Grotto

Before You Make Any Decision, Ask Yourself This One Thing

Before You Make Any Decision, Ask Yourself This One Thing

Emily Mae Mentock

Singing Opera to Bring Beauty to the World

Singing Opera to Bring Beauty to the World

Grotto

Meet the First ‘Working-Mom’ Saint

Meet the First ‘Working-Mom’ Saint

Emily Bouch

5 Strategies to Stay Calm Under Pressure at Work

5 Strategies to Stay Calm Under Pressure at Work

Mary Claire Lagroue

Finding Purpose When You’re Feeling Lost

Finding Purpose When You’re Feeling Lost

Khang Tran

6 Ways Local Businesses Can Use Your Help Now

6 Ways Local Businesses Can Use Your Help Now

Carissa Pluta

How to Make an Impact with Your Lenten Almsgiving

How to Make an Impact with Your Lenten Almsgiving

Eric Clayton

Why This Engineer Chose a Year of Service After Graduation

Why This Engineer Chose a Year of Service After Graduation

Grotto

How I Overcame Fear of Commitment in My Career

How I Overcame Fear of Commitment in My Career

Molly Cruitt

newsletter

We’d sure love to be pals.

Like what you see? Make it easy on yourself and we’ll meet you right in your inbox next time.