Building a healthy financial life can feel like constructing a house of cards: it takes a lot of work and thought to save money, but only one severe upset to drain your savings account. If you’re feeling nervous about your financial security, here are seven life events that can derail your effective financial plan.
Losing a job
Losing a job is one of the most significant financial hardships someone can face, especially if your family is living paycheck-to-paycheck or single-income. If you lose your job with no warning, it can be devastating.
It’s always a good idea to have at least three months’ worth of income in savings. That way, if you lose your job, you can pay the bills while you’re searching for work.
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A major injury
A significant injury is life-altering in several ways. You may not be able to function normally for many months, or you may suffer permanent effects. Even with health insurance, you can rack up a lot of out-of-pocket medical expenses. You may not be able to earn money while you recuperate, or you could lose your job.
If you’re the victim of a personal injury accident, personal injury lawyers like those from Schwartzapfel Lawyers can help victims sidestep financial ruin.
Divorce or death of a spouse
Losing a spouse is devastating in many ways. While you’re trying to survive the emotional rollercoaster of grieving a loved one, you also have to navigate your new financial obligations.
If you’ve been dependent on your spouse for some or all of your income, you’ll need a new financial strategy. You may have a life insurance payout, but you may also have to figure out other ways to make money. In the case of divorce, you may get child support and alimony, but it may not be enough to cover your needs fully. In that case, you’ll need to rely on additional savings or another source of income.
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Buying a home
While most people wait until they’re financially healthy to buy a home, it’s still the most significant expense many people will ever take on. You’ll usually find a lot of hidden costs with homeownership, such as property tax and maintenance. If your mortgage is more than what you’re used to paying in rent, you may find it difficult to adjust to having less money left over each month.
Starting a business
Even if you have money saved up to start a business, it can still put a strain on your finances, especially if you have a rocky start. While there are ways to earn more money with a small business, it often takes time to start showing a profit. Be sure to have plenty of extra padding in your savings account before taking the entrepreneurial plunge.
A major illness
Getting sick is a triple threat to your health: it affects you mentally, physically, and financially. In addition to the stress of being unwell, illness brings medical bills and time off work, leading to financial hardship.
Having a child
Having a child is one of the most joyful moments in anyone’s life. New babies are also a lot of work. Kids come with expenses. You’ll spend the first couple of years buying diapers and other special gear, like cribs, strollers, and baby carriers. Once your child starts school, you’ll have education and extracurricular expenses. Parenthood can make you spiritually rich, but don’t expect it to be kind to your wallet.
Parting thoughts
Financial hardships are a fact of life. Even with the best of intentions and planning, you can’t predict or control everything that happens. Keep your finances in check and work on building up your savings so that you’re ready when disaster strikes.
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