Success managing money relies on two important traits – flexibility and resiliency. A flexible approach to personal finance is essential during uncertain times, enabling you to quickly adjust, when financial demands arise. And resiliency gives you the wherewithal to recover from setbacks and move beyond individual financial obstacles.
Although proper planning sets the stage for long and short-term financial stability, even well-conceived plans are subject to change. In fact, monetary matters are so unpredictable; preparing for unexpected financial demands is itself an important aspect of effective personal money management. You cannot always see into your financial future, but there are moves you can make today, capable of reinforcing your ongoing financial health.
An Emergency Fund Serves as a Safety Net
Although it is sometimes easier said than done, setting-aside emergency resources is an essential aspect of effective personal money management. Not only does an emergency savings account furnish needed resources at critical times, but holding cash in reserve also provides peace of mind. And since unexpected expenses arise without warning, a personal contingency fund may be your best option for finding fast cash. Use emergency resources to ease the financial strain associated with the following unexpected events:
- Job Loss or Temporary Layoff – Employment income is the life’s blood of your personal economy, so cash flow interruptions can affect every aspect of your financial life. If income irregularities are on the horizon, or worse, have arrived without notice; your personal emergency fund can mean the difference between staying afloat and going under. Experts don’t always agree on the amount you should save, but a common goal is set at 6 months’ worth of personal expenses. That means, in the event of a total income disruption, your rent or mortgage, car payment, mobile phone bill and other expenses are covered by cash in reserve, for at least 6 months.
- Medical Expenses – Even with outstanding insurance coverage, you are responsible for co-pays, deductibles and other shared costs. And in many cases, policies exclude certain medical conditions and procedures from coverage, leaving you paying out of pocket. Under some circumstances, a formal health savings account (HSA) might be the best way to save for health care costs, but your general emergency fund can also be used to offset unanticipated medical expenses.
- Car Trouble – Modern families rely on personal transportation, so broken-down cars and trucks must be quickly repaired – particularly when the ability to commute is at stake. Maintaining an emergency fund enables you to get back on the road without delay, covering the cost of needed repairs. A credit card might also stand-in when car trouble strikes, but like other items charged to your card, interest and finance fees will inflate the overall cost of auto maintenance and repairs.
Are You and Your Spouse on the Same Page?
Merging individual finances can be a tricky task, bringing together habits and values, as well as funds. As you plan for financial uncertainties, synching ideals with your spouse is essential to your long-term success. Do you and your spouse share similar views about home ownership, children’s education, saving for the future, and other important big-picture money matters? And are your day-to-day spending habits compatible, reflecting shared values about money? The financial fallout from a failed relationship can leave you reeling, so forming a united front not only helps you face your financial lives together, but it also protects you in the event of a broken union. A few common financial concerns successful couples embrace together, include:
- Education – Although college costs come due as children near adulthood, parents typically contribute to college funding. To make the most of your resources, start planning as early as possible, giving college investments time to grow. And work as a family, analyzing the benefits and costs of particular schools.
- Home Ownership – Buying a home represents an important milestone for some couples, while other families are less committed to property ownership. Until you and your spouse work jointly toward the shared goal, you won’t make progress saving for a down payment and establishing needed financing. Whether or not you choose to own residential real estate, the decision must be unanimous.
- Work/Life Balance – Earning power often relates to the amount of time you spend on the job, creating a work/life dilemma. On one hand, your bills aren’t going away. But at the same time, interacting with your family may be more prized than upward mobility in your field. Finding the right balance calls for flexibility and shared commitments, sometimes sacrificing income potential for family values.
Facing challenges ranging from unexpected repair bills to costly education expenses; financial flexibility helps you overcome wide-ranging obstacles. With a well-funded emergency account and unified family philosophy, it is possible to overcome most of life’s financial trials – without lingering difficulties.