UFCU SPONSORED CONTENT — Emergencies are unpredictable. Whether caused by a force of nature, a health issue, or one of life’s curveballs, there are things you can do to prepare and protect your finances for just about every scenario.
Tip 1: Make sure you have the right insurance for where you live.
Whether you own or rent, insurance is essential to helping you rebuild should a disaster strike.
For Homeowners: A minimum of insurance is required, but it may not cover everything to fully rebuild. Look into a guaranteed replacement cost policy, which allows you to rebuild your house with improvements at current-day prices. In the event you need to rebuild, make sure your current policy includes the cost of meeting current building codes. And if flood damage or earthquakes are a concern for your area, consider adding that protection to your policy.
For Renters: While not required, it is highly recommended protecting any property that may get stolen, damaged or destroyed – after all, you can’t control the elements or your neighbors. Some renters’ insurance policies will even pay for the cost of a hotel if it becomes needed. It’s usually inexpensive, and discounts are often available if you bundle it with other insurance, like your car insurance.
Tip 2: Build your emergency fund.
Emergency funds/savings do exactly what they’re supposed to. An easy way to get started is to open a separate savings account and set aside a dedicated amount each month directly from your paycheck. The goal is to have four to six months of essential expense saved for emergency situations, and make sure the money is in an account that doesn’t have early withdrawal penalties. It’s also a good idea to keep a little of that fund in cash in your home – see Tip 5 for more ideas on a financial emergency kit.
Tip 3: The lower your credit card balance, the better.
Credit cards shouldn’t take the place of an emergency fund, but they are helpful for one-time emergency expenses, like hotel and rental car reservations. Just make sure you keep the balance low so you can pay it off once the crisis has settled. If you currently have credit card debt, focus on paying off your balance and learn how to master unexpected expenses.
Tip 4: Have a plan for the people who depend on you.
Estate planning is important to make sure that loved ones who depend on you for financial support will be taken care of. You have a few options:
- Power of attorney: Should you become unable to do so, a power of attorney enables a trusted person to make financial decisions on your behalf.
- Will: Dying without a will, known as “intestate,” can lead to a lot of confusion, which is the last thing you want for the people you love. Always update your will after major life events like marriage, divorce, and new family members.
- Living trust: A living trust is created while you’re alive, and allows you to transfer property into a trust versus keeping it in your estate. Living trusts bypass the long and expensive probate process and are harder to contest than wills, but they can be more costly and require ongoing maintenance.
Tip 5: Create a financial emergency kit.
Some disasters may require you to leave your home in a hurry. Pull together the following items and store them in an easy-to-access location, ideally a home safe or firebox:
- Enough cash for a few days worth of food and shelter
- Insurance policy documents
- Copies of deeds and titles for your home, car, and other real property
- Copies of previous income tax returns
- Originals of wills and powers of attorney, if not with your attorney or local registrar
- Backups of digital financial records
- Checking and savings account, loan, credit card, investment account information
- The key to your safe deposit box
In a separate safe deposit box, put:
- Originals of deeds and titles to your home, car and other real property
- Appraisals of expensive jewelry and heirlooms
- Originals of previous income tax returns
- Certificates for stocks, bonds, and other investments
- Trust agreements
- Copies of wills and powers of attorney, if not with your attorney or local registrar
- Home improvement records
- Inventory of household documentation
Being prepared is crucial, but once done you can be confident you’ll handle whatever life throws your way.
If you’re looking for more helpful financial tips and tools to better plan, spend, save, and borrow, check out PlanU by UFCU. You’ll find options from talking with a financial health expert to creating a personalized resource center to meet your needs.