“Anything that can go wrong, will go wrong.”
-Murphy’s Law
You are probably familiar with this saying and have, at times, uttered it yourself over the years.
Spill coffee all over yourself in the car on the way to the office on the day of a big presentation? Murphy’s Law.
Took dad’s advice to get to the airport four hours (!!) before your flight only to find out that your flight is …tomorrow? Murphy’s Law.
It’s like ten thousand spoons, when all you need is a knife. Murphy’s Law.
Just kidding. That’s not Murphy’s Law. That’s Alanis Morrissette just being “Ironic”.
Whether or not you have heard of or believe in Murphy’s Law, we can likely all agree that unfortunately, there are times when life just inevitably is tough. Those difficult times can be stressful, complicated, and wholly unwelcome. You might not be able to control everything that happens to you, but what you can control is your ability to be financially prepared when those times do come.
What is the best way to prepare for these occasions?
Two ways:
- Establishing an Emergency Fund
- Having insurance
Establish an Emergency Fund
Emergency funds (also called “rainy day” funds) are those funds tucked away in case of an emergency. As a general rule of thumb, it is wise to have at least three to six months of your income saved in an emergency fund. This way, should you find yourself out of work or otherwise down on your luck, you will still be able to meet your financial obligations and stay afloat in the meantime.
Saving money for an Emergency fund is certainly less fun than online shopping or nights out with friends, but I can assure you that the stress of not having money when you most need it is even less fun. If you don’t currently have any emergency savings, don’t fret…start now!
Your best option is to place your emergency funds into a money-market account (think savings account but with a better interest rate). The national average interest rate you can earn on a savings account is 0.10% whereas the average interest rate on a money-market account is double: 0.21%. The difference may seem small, but it is your money after all. You can open a money-market account with just about any brokerage firm – just be sure to understand if they have minimum requirements to invest. (Editor’s note: this is also something I can help with!).
If you still prefer to open a savings account, you can do so any number of ways. You can always open one with your local bank and begin depositing money each week. If you’re more inclined to save if money is automatically deducted from your bank account and transferred to your savings, consider opening an account with CapitalOne 360. This way, you can link your bank account to your new CapitalOne 360 account and automatically initiate transfers of money at the frequency that works best for you.
Insurance
This one feels obvious, but I am often surprised to learn how many people do not have health insurance or renters’ insurance. If your employer does not offer you health insurance, you can still purchase your own by either working with an insurance broker or going through the ACA healthcare website: www.healthcare.gov. Furthermore, if you are an entrepreneur, you may also be able to secure health insurance as a result of belonging to professional organizations. Some of these professional organizations have access to coverage through a group plan. Regardless of which route you take, the most important thing is that you get coverage.
Renters’ insurance is the other insurance that you should acquire if you rent your residence. A lot of landlords and property managers require this when they lease you the property, but if you don’t have it, you will want to look into getting it. This type of insurance protects you and your personal property in the case of fire, theft, or vandalism so you can rest assured that even if your laptop is stolen out of your car, you’re most likely still covered. This insurance is designed to be very affordable (according to eSurance.com, renters’ insurance protection is $14/month on average). Take a look to see if you’re covered by renters’ insurance already, and if not, make the smart choice, get coverage, and sleep much better at night.
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