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You can’t always predict when something will go wrong, but you can at least prepare for it. If you’re worried about stumbling into money trouble, you should set up the following four safety nets for yourself:
1. Insurance
You might be able to pay a few hundred dollars out of pocket to cover an emergency without hurting your budget — but thousands of dollars? Insurance is extremely useful for circumstances when you can’t imagine footing the bill.
What type of insurance should you get? It’s crucial that you get medical insurance to help you cover basic healthcare costs and manage hefty bills. Without it, you could accumulate a large amount of medical debt. Statistics show that over 30 million Americans had no health insurance in 2020, which makes certain forms of healthcare financially inaccessible and leaves them vulnerable to acquiring large amounts of medical debt. Try your best not to join that concerning statistic.
Other types of insurance coverage that you should consider:
- Home insurance
- Auto insurance
- Travel insurance
- Rental insurance
- Pet insurance
- Disability insurance
2. An Emergency Fund
Another safety net that you can set up for yourself is a household emergency fund. An emergency fund is a savings account that’s dedicated entirely to covering the costs of small emergencies. It can help you pay for everything from urgent dentist visits to car repairs without affecting your monthly budget.
If you’re ambitious, you can save up to 3 to 6 months’ worth of your income in this savings account — this will help you weather through major losses of income due to illness, grief and other life upheavals.
3. An Emergency Loan
If you don’t have enough savings sitting in your emergency fund, you can take out an online loan. You could use the loan to cover the urgent expense quickly and then manage the repayments later on.
Not all online loans will be available in your state. Make sure to search for one that you can actually access. So, if you live in Cleveland or Columbus, you want to look for personal loans in Ohio to help with your emergency situation. It will narrow down your search and make applying much easier.
4. Overdraft Protection
Overdrawing your checking account can lead to some tricky financial problems. At best, you can’t withdraw enough cash from the ATM, or your transaction gets declined at a store’s cash register. At worst, you bounce a check or miss an important bill.
To make sure that your payments go through, even when your account is in the red, you should talk to your bank about overdraft protection. An overdraft protection plan allows your payments to clear when you don’t have enough funds in the account (up to a limit). It can be a useful safety net, especially when it comes to managing bills or small emergencies.
However, an overdraft protection plan doesn’t protect you from every consequence. Your bank will still charge you NSF fees (non-sufficient fund fees). And if you keep making a habit of overdrawing your account, you could have trouble applying for another debit account in the future — even at a different bank.
In addition to overdraft protection, you should carefully track your checking account spending and your upcoming bills. These habits should prevent you from spending more than you have.
