The vast majority of Americans are only one paycheck away from financial ruin, according to a report by Bankrate.com. It’s a scary statistic and one that should concern the 63% of households that have no emergency savings whatsoever.
With this in mind, I thought I would take a look at some of the common incidents that could have a major impact on your lifestyle. These issues could happen to anyone at any time – and they could cost you a lot more than just money.
Let’s take a closer look and see if I can’t persuade you to ensure you start building up a vital emergency fund.
As all Americans know, it costs a lot of money to access healthcare. When you’re fit and healthy, it’s all fine and dandy. But what happens when you develop an illness? And what happens when you realize your current medical insurance won’t cover you?
Given that over 90% of Americans are on the wrong Medicare plan, for example, it’s easy enough to see why this might be a big problem. Even the most comprehensive insurance won’t cover you for all those expenses you will incur. You have to bear in mind that if you develop a critical illness, you might not be able to work, either.
Not only will it affect your ability to earn, but you could struggle to pay off your home loan or look after your retirement assets. It all adds up to a bleak picture unless you have significant levels of savings.
In an ideal world, you should be able to pay all your regular bills plus your extra medical expenses for around six months. If you can’t, there’s a real possibility, you will have to make healthcare choices that end up affecting your long-term health.
Illness isn’t the only thing that can stop you working. Accidents happen all the time, and it only takes a second for your life to change drastically.
If you have suffered injury because of someone else’s negligence, you have a chance of getting compensation. Hiring a personal injury attorney is your best bet to maximize your chances of getting what you deserve. However, you have to bear in mind that, in complicated cases, it can take an eternity to agree on a settlement. And insurance companies often draw things out for as long as possible to add pressure on you to accept a lower amount.
Can you say with any confidence that you have the financial wherewithal to see you through a few months – or maybe a couple of years? There are other complications when you suffer a severe accident, too.
Your family will be under a lot more pressure as they will have to care for you. You might slip into depression or suffer psychologically as well.
Natural disasters are more frequent than you might think. And we all know what can happen when a big storm or earthquake hits an area – the results can be devastating. You could lose your home, your community – and even friends and family.
If you live in an area where quakes, tornados or other extreme weather is common, make sure you get insurance. It might seem like an extra expense you don't need – but you won't be thinking that if disaster strikes.
Given the enormous amount of people that still haven’t recovered after Hurricane Katrina, it is foolish not to get protection.
Even if you are prudent with your money, sometimes things can go terribly wrong, and there is nothing you can do about it. Take the economy as a prime example. You don’t have to look far back into history to see the utter devastation caused by the financial crisis of 2008.
Sure, the headlines were all about banks losing billions, the effect on poor people all around the world was even worse.
House prices in the States declined by around 30%, meaning some people were in negative equity. In effect, they had to pay to sell their home. Others defaulted on mortgage payments, going from homeowners to homeless in the space of a couple of months. Jobs in all kind of industries disappeared, and banks refused to lend to most startups and small businesses. Unemployment more than doubled, and some people have never recovered.
So, even when the going seems good, you can never be sure the rug won’t be pulled out from underneath you. Make sure you start putting money away in an emergency fund right now – and give yourself a shot at protection from any financial disaster.