Start With The Big Stuff To Avoid Financial Disasters
Buying too big with the big stuff such as cars and homes is one of the biggest reasons many cannot withstand a small business or personal financial disaster. Many of us forget that there are affordable ways to buy homes and cars to avoid future financial disasters. What happens, is that these two items are based on way too much emotional buying. Keep your head on straight by researching before you purchase. Ask questions like; Do I really need a new car? What will the warranty maintenance cost on my new car? What if I purchase the same car 3-4 years old, what would the savings be? If you have a job, no matter how secure you think you are, that security could be in jeopardy at any time. So, purchasing a car that you can buy cash or with very low payments will be the better option. The same holds true with a home, if it is too large, with a stressful payment, the smaller home with the lower payment, that carries less stress may be a better option.
Stay Properly Insured
This seems to be plain old common sense. But, sometimes people with a home and car let important insurances lapse due to illness or thinking they don’t have the time, they let important insurance lapse, due to simple negligence. Stay fully insured with a car, home, health, life, and if you own a business – all applicable business insurance. A small business lawsuit should always be covered with business liability insurance, not your personal assets – so, don’t take the chance.
Don’t Waste When Times are Good and Income is High
We have had many economic downturns and upturns in the past several decades. The one regret I have heard a lot when I talk to people who make a lot of money when times are good is — “I lost my mind when I had a lot of money, and spent without regard to the reality to the future, then a financial disaster came”. Because nothing is guaranteed, even good times, it is important to handle your money as if the money will stop anytime, that will help protect your assets.
Let Your Kids know Money Doesn’t Grow on Trees
There are some parents who, despite much evidence to the contrary, feel it is important their kids need to have all the material trapping they did not have. It is not necessary, and it is not true. Your kids will literally begin to think that money grows on trees and drops from the sky. Your kids know you love them when you give them positive time and attention, so it is not necessary to spoil them, and it may lead to a financial disaster. You can reward them without giving them too much, some parents to the tune of going bankrupt. At this point your kids probably are not aware of potential financial disasters, but at least you can start to teach them money skills.
Have a Sick Fund for Days Not Covered by Extended Illness
Most jobs have sick leave, most small businesses have no sick leave unless they create it themselves. As an employee, you may run out of sick leave if you have an extended illness. Save money in a sick fund to cover an extended illness. This is especially important for small business owners.
Make Your Savings a Bill
Create a general savings fund and treat it like a bill. You are probably seeing a pattern here. Saving money as several bills is just as important as paying existing bills. It should be a part of a general budget plan for financial disasters.
Don’t Borrow From Your 401k, Borrow From Your General Savings
As far as I am concerned, borrowing from a 401k is a budget planning financial disaster unless you are suffering from a fatal illness, borrowing from your 401k should not be a consideration. You should have an automatic saving account for financial disasters that you can borrow from.
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