Do you seek more peace of mind in your life? If so, take steps to protect yourself from unanticipated expenses and financial emergencies. By doing so, you’ll save yourself major stress, both today and in the future. Keep in mind, however, that the financial protections that are best for your neighbor may not be the best for you, and vice versa. So take time to research and decide the type of financial protections that will best serve you and your long-term financial goals. Consider how these three forms of financial protection can apply to you:
Build Your Emergency Fund: While our goals for the future may be unique to us, we all share a common experience: no matter how hard we try to prevent them, we all still encounter emergencies. These can range from a leaky sink or sudden car repair to unexpected unemployment. By building an emergency fund, you’ll protect your ability to maintain your savings momentum and pay your bills no matter what urgent matter arises.
If you are unsure how much you need to save in order to remain financially stable in an emergency, consider starting your emergency fund with the goal of covering one month’s unemployment. Then, consider saving enough to cover three month’s unemployment. An emergency fund will allow you to continue functioning as you need, without jeopardizing your lifestyle or savings progress. Build an emergency fund now, to avoid having to dip into savings you meant to put toward your future home or retirement fund or both! Create a realistic savings timeline that you’ll follow to achieve your goal. If you dedicate a small but consistent amount of money over the next few years, you can create an emergency fund that will allow you to continue your financial progress uninterrupted.
Avoid Going Too Far into Debt: Try to control your credit card spending and borrowing habits. Otherwise, you may find yourself in a situation where you are struggling to afford your credit card, loan, or mortgage payments. Debt can accumulate and jeopardize financial security before we know it. Carrying a large sum of debt each month will negatively impact your credit score. If you limit your debt as much as possible, you won’t feel financially beholden to a sea of interest and due dates. Instead, stay financially grounded by managing your debt effectively.
Your Unique Financial Protection: A basic combination of insurance policies will keep most of us free of major financial headaches. While the combination will look different for most people, in addition to auto insurance, many of us will benefit from some form of health insurance, renter’s or homeowner’s insurance, and life insurance.
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