Everybody hits a rough spot sometimes, which is why it’s important to have a plan in place to ensure you’re secure. No matter if it’s an unexpected accident or being hit with a surprise bill, knowing the situation’s limitations and having a plan in place is crucial. That’s why we’re bringing you a few common examples to consider.
Getting In An Accident
Although they can come out of nowhere, being in an accident can lead to quite the financial predicament. The resulting headache makes sense; according to ASIRT, car crashes are the 9th leading cause of death. Whether it’s your fault or not, an accident can be a major setback, which is why you need to know how to respond financially.
If the accident was your fault, then the first thing you should do is contact your insurance company and explain everything that happened, as well as file a police report (note: don’t admit fault until a law enforcement officer declares it). See what insurance can cover versus what you might need to pay out of pocket. Either way, you’ll probably have a deductible, which is why it’s not a bad idea to have an emergency fund for situations like this.
If the accident was the other person’s fault, then reaching out to insurance and the police is a no-brainer. Furthermore, don’t be afraid to reach out to a personal injury attorney who can negotiate a settlement with the opposing insurance company. Although it might seem greedy to sue for cash, you run the risk of complications from your accident, so don’t hesitate to use this as a means of compensation for work you might miss or other needs.
Being In Credit Card Debt
Another financial situation you should be careful about is getting into credit card debt. Most people end up in this position because they hit a tough spot or weren’t mindful of their budget, and getting out of credit card debt can be quite the challenge. As noted by NerdWallet, with your average person holding $15,983 in credit card debt, it can feel like an eternity to pay your debt off. That’s why you need to follow a plan for paying off credit card debt.
Write down all the credit card debt you currently have and what the total cost will be, taking into account any interest and annual or late fees. From there, see if a balance transfer or credit card consolidation could be a smart option, enabling you to pay less. Furthermore, it might be wise to pick up a side gig that will give you the money to pay off debt more quickly. Although credit card debt isn’t the end of the world, it’s something you have to be proactive about, or it can become expensive quickly.
Needing A Car Repair
One of the worst feelings is when your mechanic says “something’s wrong with the car.” You never know how much it will cost or if it’s worth taking in for a second quote from another mechanic. According to Cars.com, your average repair costs for a car run anywhere from $500 to $600 per job, which can be quite the unexpected expense. That’s why coming up with a savings plan is imperative.
With car repairs, the goal is to estimate the funds you may need based on a few different factors. First, think about the age and mileage of your car and any upcoming maintenance that you might need. Identifying factors such as climate (for example, cars are rust-prone in snowy or beachy areas) and road conditions can be clutch in your planning as well. The better able you are to paint a picture with your budget, the more accurate a savings plan you can put together for an emergency.
Part of being a homeowner is accepting that repairs are going to be inevitable. According to The Balance, a rule of thumb for estimating costs is to save approximately 1 percent of your home’s total value. That can be a good starting point, but it is somewhat broad, as many factors affect potential home repairs.
The first way to assess costs is the age of your home; determine if there are major repairs that could be necessary for your older home, such as changing the HVAC or replacing kitchen appliances. From there, look at the what-ifs, such as how the irrigation is around the house or if any dead trees need to be cleared. Your home is one of the most significant investments you’ll make, so it’s good to stay on top of what could cost you money in the long-run.
What are some unexpected situations you’ve had to handle financially? Comment with your answers below!