Unexpected events, such as a job loss, medical emergency, or property damage, can set you back financially. Fortunately, there are steps you can take before these events occur to help minimize their impact on your finances.
- Review your insurance
Insurance can help protect you financially when unexpected events occur. Reviewing your policies regularly can help ensure that you have appropriate coverage for your changing needs.
You may want to start by reviewing your long-term disability insurance coverage. This type of insurance replaces part of your income for a period of time when you are too sick or injured to work. Unlike health insurance, which helps cover your medical expenses, disability insurance provides cash you can use for your living expenses. If it looks like your current coverage may not be enough for your needs, talk to your financial professional about supplementing it.
Also review your homeowners insurance every year and if you make major changes to your home that may make it more expensive to repair or rebuild you may want to adjust your policy. It’s also a good idea to review it when you acquire valuable items, such as jewelry or art, that may require the addition of a rider to your policy.
- Create a power of attorney
Even when you are very ill, your bills still need to be paid, your financial accounts managed, and your tax returns filed. Who will handle these tasks for you if you are ever incapacitated and unable to handle them yourself? Have a name in mind? Great! Now consider granting that person the legal authority to manage your finances by creating a durable power of attorney for finances.
A durable power of attorney for finances is a legal document that makes it possible for the person you name to step in after you become incapacitated and handle the financial tasks you specify in the document. Your estate planning professional can help you set one up.
While you are at it, you may also want to set up a health care proxy to name the person you want making your medical decisions if you become incapacitated and a living will to specify the types of medical treatments you want (or don’t want) to receive in an end-of-life or permanently unconscious situation.
- Build an emergency fund
An emergency fund is simply an amount of money that you set aside to help cover your expenses when unexpected events, such as losing a job, happen.
Having a stash of readily available cash to draw on in emergencies may help you avoid having to use credit cards or loans—both of which can be expensive—to cover large, unexpected expenses. It may also help you avoid having to withdraw money from your retirement accounts when emergencies occur, which can help keep your retirement savings on track.
Because emergencies tend to pop up without warning, it’s a good idea to keep your emergency fund in an account that can be accessed quickly when needed and where it has the potential to grow over time. Interest-bearing savings and money market accounts can be good choices.
For additional questions, please consult with your trusted TBC Advisor.
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