Financial emergencies: Are you prepared?

Published 10:00 pm Monday, June 22, 2015

Few of us manage to get through life without having to face some type of financial emergency.  Whether it’s a major car repair expense, a broken water heater, or a medical expense, life happens – and it usually costs money. According to a recent report in USA Today, many Americans report suffering financial emergencies, but the depressing fact is that about 25 percent of Americans have no funds saved up in case of an emergency – that’s 75 million of us with no safety net savings.

I recently realized the importance of this concept as I faced a medical situation in which surgery was my only real solution. I also quickly learned that my medical insurance didn’t cover all my costs for the procedure, and I was going to have to pay several hundred dollars in co-payments under my new, lower premium health insurance. Can you imagine having to decide between being treated, going into debt, or enduring chronic pain because you don’t have the money to pay your share of the expenses to afford treatment?

Fortunately, we’ve been blessed to be able to put some funds away for a “rainy day.” That allowed us to face the financial emergency that came up without going into debt. It also reinforced the importance of the concept of “paying yourself first.” Doing that may require that you change your habits just a bit, and if possible, save something for emergencies from every paycheck before indulging yourself in other discretionary spending.

The rule of thumb suggested by most good financial planners is to create an emergency fund that is at least equal to your monthly expenses for a three- to six-month time period. For some that’s not easy, for others it may seem impossible, but having something put aside when the emergency financial need is immediate is truly comforting.

Think about the financial impact a serious situation like losing your job can cause your family. You’ll immediately be faced with paying for the basic necessities like food, rent/mortgage, electricity, phone, car, and other basic needs. That’s when you’ll thank heaven that you were disciplined enough to save the funds that will bail you out until, hopefully, you’re able to get back on your feet financially and replace those emergency dollars with a paycheck. It will also be a great reminder as to the importance of having an emergency fund in place for when, not if, the need arises again.

Remember, if you don’t have an emergency fund, the only option you may have is to put yourself into debt, and that can often be a deep hole from which to climb out.

Ron Kauffman is a consultant and expert speaker on issues of aging, Medicare and Obamacare. He is the author of Caring for a Loved One with Alzheimer’s Disease, available as a Kindle book on Amazon.com. His podcasts can be heard weekly at www.seniorlifestyles.net. Contact him at 828-696-9799 or by email at drron561@gmail.com.