Not having a financial backup plan can put you and any of your dependents at serious financial risk. Whether it’s a family member getting unexpectedly hospitalized or your household’s breadwinner losing his/her job, the lack of a solid financial emergency plan can send your personal finances into a downward spiral and endanger the quality of life you currently enjoy. Here are four steps on how to create a financial backup plan.
Know Your Priorities
Knowing what financial tasks need to be done and which ones to prioritize is important information when creating a financial backup plan. This includes identifying all monthly expenses, what specific dates they need to be paid off, and which ones charge fees when you pay late. Some missed payments can lead to hefty fines or even a lapse in policy coverage, e.g., your life insurance plan.
Automate as Much as You Can
One of the simplest steps to improving your current financial situation is to put bill payments on autopilot. Paying your bills on time leads to a better credit score and avoids any costly service charges. Connect your customer accounts, be it a student loan or electricity account, to your bank, so it can automatically take the amount out every month without you having to log in manually and do the process yourself.
Call in the Pros
Most people don’t even know what a solid financial backup plan looks like, much less know how to create one. The current higher education system fails to arm students with the financial know-how and skills to manage their finances, whether filing taxes or managing monthly cash flow. Have a daily money manager or financial advisor come in and take a closer look at your finances.
Cover Yourself Legally
Anytime you are hiring someone to manage your finances or make an investment decision for you, it pays to cover your legal bases. Consult with a lawyer concerning your arrangement with other third-party financial service providers.
Creating a financial backup plan is all about knowing your current financial situation, seeking professional help, and developing an easier system for paying expenses and saving.