If there’s one aspect of life that is completely unpredictable, it’s finances. Sometimes it doesn’t make sense. It takes years of hard work to get a small raise, yet in the blink of an eye, you can be buried in a mountain of debt due to an unexpected hospital stay.
While it’s impossible to know exactly what’s coming around the next corner, here’s how you can be prepared to face anything:
- Gather a list of resources and do some research
Nothing’s more frustrating than trying to find the help you need in the midst of a crisis. When you’re emotionally distraught, it’s harder to make sound decisions. It’s also easier to get stuck and feel frustrated when you can’t find what you need.
Gathering a list of resources and doing research ahead of time is a great way to prepare for any future incident that may wreak havoc on your finances. For example, research to learn about the differences between Chapter 7 and Chapter 13 bankruptcy.
Nobody expects to need to file for bankruptcy, but it happens. Bankruptcy isn’t usually the result of reckless spending, but of major, unexpected setbacks. Although bankruptcy filings fell 4.7% as of March 2017, there were still 794,492 filings in 2017. The more you know about your options ahead of time, the less confused or hopeless you’ll feel later.
- Find out what your insurance policies cover
Knowing what your insurance policies cover sounds obvious, but many people don’t actually know. Sometimes the paperwork is difficult to understand or there are extra terms and conditions that make figuring it out seem like a complex math problem.
If you’re paying for car insurance, life insurance, or medical insurance, you have a duty to understand what’s covered in your policies. Knowing this ahead of time and writing it down for future reference can save you later on.
For instance, if you end up in a car accident that wasn’t your fault, the other driver’s car insurance will probably cover the damage, but your car is the least of your worries. You could end up with long-term therapy needs, which means a mountain of debt.
“A dentist driving in Austin was rear-ended by a pickup truck,” Attorney Byrd Davis describes. “She underwent more than 160 physical therapy sessions; three epidural steroid injections in her neck and five in her shoulder; medical branch block injections; a radiofrequency neurotomy; and dry needling.”
What the dentist experienced is fairly common. Many car accident victims require ongoing medical care beyond what either insurance policy covers.
If the other driver’s policy isn’t enough to cover your medical bills, and your own insurance is tapped out, you’ll be on the hook to find another way. Granted, you can pursue a lawsuit against the other driver to recover the rest. However, after an accident, you may find the process of finding a car accident attorney more difficult due to your injuries.
Do some research ahead of time and find out who the top lawyers are in your area. Jot down their name and number and file the information with the other research you’ve done. Be prepared to consult a lawyer to help you receive compensation if you are involved in a car accident.
- Research the different types of loans
When you need money immediately, any loan you can get quickly can be appealing. Don’t let yourself get into that position. Learn which types of loans have the most reasonable terms. If you end up in a financial crisis, you won’t choose the first loan out of desperation and sink yourself deeper into debt.
Know what loans to avoid
Part of understanding loans is knowing which ones to avoid at all costs. For instance, payday loans are one of the fastest ways to get trapped into a cycle of growing debt. According to NationalDebtRelief.com, payday loans can cost you up to 400% in interest. Still, 12 million Americans take out payday loans every year and pay out $3.4 billion in fees each year. Of that number, $2.6 billion in fees are due to borrowers repeatedly turning over their loans.
Talk to your boss first
If you do end up in a financial crisis, talk to your boss first before taking out a loan with huge interest. You may be able to receive an advance on your next paycheck. Just be sure to manage your money wisely because your next paycheck will be short.