Do you plan for unexpected financial situations?
Last year a guest speaker came to one of my classes. In the middle of his speech this individual made a note that when running a small business you need to, “hedge against unforeseen circumstances.”
How stupid is that? How can you plan for something that you don’t expect to happen? As time went on and unexpected events slowly started to happen with me I started to second guess the whole idea.
Last week as I was buried with a boatload of readings for my final exams I was clearly under an immense amount of pressure. Of course to make things worse, the last minute anxiety was kicking in so I was a bit out of it. While driving home from the library I made a sharp turn only to realize I hit a batch of black ice and bham! I hit the curb. I knew damage was done. I called over my friend who’s a mechanic and he assessed the damage for me and told me exactly what to get done when I got to the mechanic shop.
Long story short I ended up spending four hours (which I did not have) and $250 (which I did not want to spend) at the mechanic shop.
Can you plan for unexpected financial situations? Well you can’t exactly plan but you can be as prepared as possible. A look at how you can plan and prepare for unexpected financial situations:
Basic money management skills help
If you have money saved you can better deal with financial mishaps. Mind you I cursed and threw things around for a few hours but I was not stressed out about how I would pay for the damage. I will admit that I’m holding off transferring the money from my online savings account to my credit card for as long as I can. I will probably curse some more when I do finally transfer the money over. However, at the end of they day I’m fortunate enough to know that my savings can help me deal with the BS that life can bring us.
The almighty emergency fund
An emergency fund is perfect if you want to alleviate financial stress caused by unexpected incidents. Some of you reading this don’t care much for the whole “emergency fund” label. Call it what you want to call it. Just follow the advice your Grandma gave you, “save your money for a rainy day, kid.” We will all experience a rainy day at some point. Some of us will even experience rainy weeks and rainy months.
How much money should you have in an emergency fund? There are so many general rules of thumb out there and I don’t really subscribe to any of them. I will say that it should be at a minimum of $1,000 and a maximum set at what you think is reasonable given your own unique lifestyle.
Get rid of your debt
When you are in debt it can be very stressful to deal with unexpected expenses. Any time something happens you will have to acquire more debt to deal with it. Obviously there are many advantages to be being debt free in your twenties, but arguably one of the greatest benefits is being able to deal with the financial mishaps of the real world. Find a debt repayment plan that works for you and get to work.
Cut out the whining
Okay shit happens, what can you do? I wasn’t happy with my situation but it’s life. It could have been a lot worse. I am safe and well. The damage is minimal. Most importantly, nobody else was hurt. Stop whining and crying when things don’t go as planned.
I remember hearing on the radio one day that life is 10% what happens to us and 90% how we react to it. I don’t know the merit behind this statement but your reaction to the unexpected will speak volumes about you. Complaining will not solve anything and nobody else will really care because everyone has their own problems.
Control the stuff you can and try to prepare as best as you can for stuff that is out of your reach.
Are you guys prepared for unexpected financial incidents?
(Note: Sorry for my slow responses to email messages and comments. I was going through my final exams last week. Now that I’m on my school break, everything should be back to normal, if not better!)
5 thoughts on “Planning For Unexpected Financial Situations”
Having an emergency fund is right up there with having a budget. You MUST do this to get ahead financially. Glad to see you had yours. Grandma’s advice works!
Glad to hear you are okay, and all in all–not too bad on the damage. It can be kind of unnerving when you get into an accident.
I completely agree with the 90% rule (although my wife has to remind me all too often to follow it myself). Having that emergency stash put away definitely helps takes a lot of the stress away from that kind of situation.
Well I will admit that despite having an emergency fund, it still sucks handing money over! The 90% rule is another one of those things that I strongly believe in but have a difficult time following it. How have you used it in your own life?
I can’t think of a specific instance, but whenever something bad happens, I’m always reminded that I can choose my response to the problem.
Everyone makes such a big deal about an emergency fund. I don’t know if it is really necessary for everyone. If you have good credit, banks and credit cards will be more than happy to loan money.
On the other hand, if an emergency fund makes people feel more secure, then it is probably a great idea.