Some people tend to think that life is the things that happen to us while we make other plans. A good example of this is personal finance. You might sit down and come up with a fantastic budget that covers everything and plans your funds down to the last cent. Then, your car gets sideswiped, your water heater bursts or something else unplanned happens, and your budget was all for nothing.
That’s why you need to have a plan in place for the unexpected. You might start an emergency fund meant to cover those unexpected expenses or carry insurance to protect your family and yourself from issues that might even bankrupt you otherwise. The average life insurance cost isn’t exorbitant at all. The point is, with a bit of planning, you can be prepared for any rainy day.
There are a few costs associated with healthcare, such as minor illnesses, medicines, and checkups, that are more normal and can be planned for. However, you might need some emergency savings to deal with others – such as being hit by a bus (it really happens), or experiencing a burst appendix, or a worldwide pandemic. In situations such as these, you can’t just concentrate on the injury or illness, you also have to contend with making sure the bills get paid. The comfort of an emergency fund can ease that stress, leaving you free to concentrate on recovery.
If you happen to be a car owner, you can expect to spend a certain amount each year just to keep it running. You might not know exactly which car repairs it’ll need or even when, but you can definitely estimate when you’ll need a timing belt, new tires, etc., and budget for these repairs.
What you can’t plan for are things like accidents that can cause a lot of damage at once. If you don’t have insurance or the right coverage, this could cost you quite a bit and leave you struggling when you might also be severely injured.
Like vehicles, houses are nearly guaranteed to cost you a bit of money each year. There’s something called a 1% rule – which is where you set aside 1% of the purchase price of the house each year for home repairs – which is a great way to guesstimate what that cost might be, but it can still be off the mark. There will be some years when your home doesn’t need too much in the way of repairs and others when it’ll need quite a bit. Then there are maintenance issues that need to be done year-round.
Just like with vehicular issues, small issues in your home can mushroom into much larger ones if they aren’t promptly dealt with. That means the ideal method to dealing with home maintenance is to take care of things as soon as possible. It’ll always be much better to fix small leaks immediately than to spend thousands to replace an entire roof and moldy walls later on.
The expenses we just talked about aren’t the only sorts of unplanned ones you might come across. For example, a home invasion might leave you with the task of replacing many valuable items. There’s also the possibility of a lawsuit, which might have the outcome of you losing all of the assets you have. Reasons like this are more than enough for you to set up an emergency fund and to get all of the insurance coverages you need and can afford. It’s better to have it and not need it than to need it and not have it.