Life after you reach adulthood is going to be rife with unexpected setbacks. Every day something new might come up that’s going to be a gut punch to your plans and bank account. But knowing what potential financial crises you’re going to face and how to deal with them is going to make your ability to adapt and rebound better and keep you out of a financial hole that may one day lead to bankruptcy.
Events in your life are going to come up and they’re, surprisingly, going to cost you money, perhaps leading to bankruptcy.
You might not think about it at first, but things like a broken appliance can be as costly as a sudden job loss. Knowing what can hurt you and how to react to it, is going to be the difference between a life of financial success and an early financial crisis.
Below are some of the most costly and unexpected things that can come up and cost you a lot more than you want.
This one is probably the one that keeps people up at night the most. A sudden loss of income when you weren’t planning for it can be devastating to your finances and your life plans. Perhaps you were laid off and have a bit of severance to help you, but if you don’t, the best thing to do is prepare for this with an emergency fund–separate from your savings. Hopefully you never have to use it, but just in case.
Unexpected Car Expenses
You can plan for inspection or oil changes. But, sometimes, things are out of your control. You could get into an accident or a fender bender, you could come outside one morning to find someone has left a sizable dent in your car with no note. What do you do? Planning with an emergency fund is the best way, but you’ll also want to make sure you do research on what exactly your car needs.
This is one a lot of people don’t consider. But if a family member suddenly dies or falls ill and you need to go to them, how are you going to pay for it? The best option is going to be to utilize a credit card to put the expenses on and work on having a payment plan to pay it off down the road.
Should I Have A Credit Card?
Credit cards are a slippery slope. You get your first one when you’re young for emergencies and suddenly find yourself making unnecessary purchases. Having a credit card solely for emergencies is important but you need to make sure you stick to it. Having an emergency card can help if you don’t yet have enough saved in an emergency fund. But make sure you know how you’re going to pay it off.
How Much Should I Have in My Emergency Fund?
As much as you can afford. But, as a rule of thumb, 3 months’ worth of living expenses should be in a solid emergency fund. That means rent/mortgage payments, bills, and money for food. Depending on where you live and how you live, that number will fluctuate, so you’ll need to calculate it for yourself.
Finances are scary as it is. And unexpected expenses can ruin your financial future if you’re unprepared and not careful. So, know what can come up and how you’re best going to respond to it when it happens.
Debt can get out of control pretty fast when you are not prepared. Physical and emotional stress takes their toll and making ends meet becomes increasingly challenging. Know that there are debt relief options and talking to a bankruptcy attorney is a great place to start.
The attorneys at Border Law PLLC are your one-stop source for personal or business bankruptcy services. We are a trusted consumer debt law firm in Michigan and specialize in Chapter 7, Chapter 11, and Chapter 13 Bankruptcy as well as, any consumer debt, real estate or landlord-tenant matters. Find out if bankruptcy is right for you, call us for a Free Case Evaluation!