Financial curveballs happen to almost everybody at some point in their life, whether it’s a sudden loss of employment or unforeseen car repairs. But there are ways you can prepare for these challenges in advance to reduce the impact they have on your life. So, here are just a few steps you can take to give yourself peace of mind when it comes to your financial future.
Build an Emergency Fund
An emergency fund is a separate pot of money that you only use for emergencies. It’s designed to cover you should you face a financial crisis, so you should aim to have at least three months of expenses in it. You can use a tool such as this Sofi emergency fund calculator to help you work out how much you need to save.
The amount may feel overwhelming, but you don’t need to have it saved up immediately. As long as you consistently add to it, no matter how little, you can build it up over time.
Consider Insurance
Whilst insurance does add to your monthly bills, it can be an important safety net. There are a variety of types, from health to home insurance, and each policy is different so it’s important to do your research so you get the right type of policy and the right level of coverage.
Diversify Your Income Streams
Relying on one source of income can leave you unprotected if it is disrupted. If you have the time, resources, and skills, consider setting up a side hustle or take on freelance work to give yourself a second source of income. Your side venture doesn’t have to bring in a considerable amount of money, just enough to ease your financial pressures.
Avoid High-Interest Debt Where Possible
High interest credit cards and loans can quickly become a financial burden, and they can make it more difficult to handle unexpected financial situations. It’s best to avoid these where possible, but if you do take out a credit card or loan with high interest, you should make paying it off one of your top priorities.
Remain Informed
The more financially literate you are, the better equipped you will be to deal with a financial curveball. Be sure to keep up with the latest financial news and stay on top of your personal finances so you always know what position you’re in.
Be Prepared for the Worst
It’s important to prepare yourself for the worst case scenario, but hope for the best case scenario. By building an emergency fund, getting the right insurance, ensuring you have more than one income, avoiding high interest debts, and staying financially informed, you can have peace of mind and prepare for any financial curveballs you may face.
