Today’s post is by staff writer, Kayla.
Optimism is a good sensibility to cultivate in your daily life. It helps us get out of bed in the morning, keep up our energy and happiness, basically do all of the stuff that we need in order make a life. But optimism isn’t the best way to formulate your finances. Despite this, numerous people work out their budget as if nothing is ever going to go wrong. There’s no savings squirreled away for surprise expenses. There’s no investment for the future. And debt is so common, it seems like people are hoping that creditors will simply forget the debt ever existed in the first place. Now that’s optimism!
People who master their personal finances might practice optimism in their daily lives, but when it comes to their money, they’re prepped for a whole host of worst-case scenarios. This doesn’t mean they’re doom and gloom people. They’re just ready for life, no matter what’s in store. Here are some of the ways you can prepare the worst, even while you hope for the best.
- Untimely Death. This is the big one. Nobody likes to sit around pondering their own mortality, but this doesn’t mean that this day is coming sooner or later. Most of us hope that it’s coming later, but this isn’t always the case. To prepare, term life insurance or an accidental death policies are likely the best possible option. Thus prepared, you won’t have to worry about how your family would fare if you became ill or were in an accident. It’s really easy to work out, so why not take care of this one today?
- Loss of a Job. Most people lose their job at least once in life. Whether you are a single person or you have dependents, losing a job can be a personal catastrophe. But it’s easy to prepare. Most personal finance gurus recommend that you should have an emergency fund, at least enough to cover your expenses for 6 months. Do more if you feel that you need it. Thus prepared, you won’t have to worry so much if your boss one day pulls the rug out from under your feet.
- Old Age. Almost as certain as death itself, old age is your only way through your senior years. With it comes a bunch of predictable difficulties, including illness, disability, and a probable loss of personal income. The best way to prepare for this is through savings and investment. Savings should be similar to the plan written up in point 2. Retirement investment usually involves index mutual funds. These depend on the overall health of the economy, but they tend to grow year by year. If you put money away when you’re young, you’ll have a big return when you’re old and need money to live on.
These are just three examples of common worst case scenarios. Actually, these things happen all the time and definitely deserve your attention. So prepare for them, don’t worry about them. When the worst happens, you’ll be ready and waiting for it.
16 responses to “Personal Finance Tip of the Day: Hope For the Best, Prepare for the Worst”
No matter how much I plan, there are always unexpected expenses. Car repairs, home appliances breaking, odds and ends for the kids, etc. An emergency fund is one of the greatest protections to your savings and investments. I encourage everyone’s first savings priority to be establishing a 3-6 month emergency fund.
That’s exactly right Dane! As soon as I think I’m going to have “extra” money one month, something unexpected pops up with the house, car, or my pets.
I definitely go by the “hope for the best, prepare for the worst” advice when it comes to personal finance. Another biggie that people don’t like to think about is job/income loss due to disability, which can last a lot longer than your average emergency fund. Over 1 in 4 of today’s 20-year-olds will become disabled at some point before they retire, and yet so many people don’t have disability or income protection insurance.
Yikes! That’s a scary stat.
I’m agree if you are optimistic but you are savings for emercencies, you will be prepared for this things…thanks for sharing!!!
Hope for the best, but prepare for the worst. I like it! I always plan for the worst because I am a worry wart, and because I like to be prepared for anything that comes my way.
I am a worrier by nature too Holly.
Even if you think you’re healthy, happy, and thriving financially, disaster could strike. It was a huge eye-opener for me when one of my husband’s coworkers ended up in the hospital last Thanksgiving. He was hanging Christmas lights when the ladder (that his sons were firmly holding) buckled. He fell 25 feet, and now he will be in a wheelchair for the rest of his life. You never know what you’ll be faced with in life, so it’s absolutely essential to hope for the best but plan for the worst.
Yikes! That’s a scary story. Accidents like that are unfortunately one of the best reminders that you need to be prepared for the worst.
Life insurance was a thing I was waffling on for a while, but I’m glad I finally made the plunge. Signing that form gave incredible peace of mind. Knowing that my wife and children will have a lot less to worry about financially if something ever happens to me is priceless. And it’s pretty cheap too at about $400 per year!
That is a pretty good deal for peace of mind.
Yes! This is great advice! I have to say that it’s never said enough because people continue to believe it won’t happen to them. Great post.
Great advice! I come from the land of hurricanes, so preparing for natural disasters is second nature to us. We always prepare for the worst and pray for the best. It’s the smartest way!
Definitely! We don’t have hurricanes where I live, but we do have tornadoes. Yikes!