Many people with steady paychecks don’t worry about the financial unknown until it’s too late. Once they’ve been laid off or downsized or are hit with a huge bill for medical expenses or other unforeseen event, they suddenly find that it’s too late to start preparing emergency savings for the unthinkable.
Looking ahead to potential financial calamities can be a good – albeit, maybe not fun – exercise for preparing to meet the worst case scenario head on. Fear of an uncertain world and all the financial emergencies that can arise can help push you to start building an emergency fund to handle such costs before it’s too late.
As a self-employed individual for the past seven years, I’ve become quite adept at finding work and new income streams. This doesn’t mean that all is hunky-dory in my income world though. Having income suddenly and unexpectedly yanked out from under me can come as a shock. And having gone through this process more than a time or two has left me better prepared for when the next blow comes. However, the same type of thing can happened with regular employer-sponsored work roles through layoffs, downsizing, and work-hour reductions.
While this isn’t a fun way to conduct business, it’s allowed me to increase our emergency fund when times are good for when such drops in income occur so that we aren’t left high and dry or going into debt to pay the bills.
Fear of health issues
My wife is a type 1 diabetic. And while she takes incredibly good care of herself by monitoring and adjusting her blood sugar levels, I still worry. With kids now in the picture, my rate of concern over health-related issues or injuries goes even higher.
While it’s not fun to think about, considering health or medical emergencies and the associated costs that such emergencies could entail is enough to have us readying ourselves for the worst while hoping for the best. We do our best to keep an emergency fund of $5,000 on hand to cover any such events. This amount is enough to cover our deductible and out-of-pocket insurance costs.
Then there are all those economic unknowns. From inflation and extreme government spending and debt, to a stock market or housing market collapse, there are any number of factors to plan for out there.
Personally, I think that being well-diversified is one of the best ways to be prepared for a variety of economic unknowns. Through a combination of small and large-cap stocks, bonds, and cash in the stock market, savings bonds, money market funds, and cash, silver and gold coins, land, food and water, guns and ammunition, or whatever fits a personal savings strategy best, in many cases, the more spread out savings and investments are, the better we can protect against a variety of economic issues and conditions. While it can take time to create such a portfolio of holdings, doing so may provide better peace of mind and cover numerous bases regarding the rise and fall of the economy.
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.