How to handle unexpected expenses?
People usually make a budget and spend according to their budget. Most of the financially focused people would do this. There will also be people who don't make such things and keep spending what they earn. Having a planned approach when it comes to financial management is very important. If we don't have proper plans, we may not be able to save enough money and if we don't have control over our expenses, we might end up spending a lot of money.
Having a good financial discipline can control unexpected expenses but what if some expenses are emergency-based and we don't have enough funds to handle that? That's why saving from a very young age is encouraged. In this article let's see how we can handle unexpected expenses that suddenly pop up and how we can handle them wisely.
Having funds saved to handle emergencies
I usually like the idea of having some money saved in handling emergency needs. We have to start maintaining a corpus fund where we usually don't touch that money and at the same time it is always accessible whenever there is a need. People keep this emergency fund as physical money and some people are okay to have it digital but easily accessible. They keep it in a flexible savings account than keeping it as a fixed deposit.
Make sure we are medically covered
Next to emergency fund handling, having the full family covered with medical insurance is very important. People usually go for medical insurance but I prefer having enough funds saved and kept in an accessible place that would continue to give some small interest and at the same time easily accessible. This way if there is a medical emergency in the family those funds can be used.
I don't take any medical policy but I usually believe that having some decent amount of money in the savings exclusively kept for this purpose can solve the purpose. Just keeping the money alone in the savings is not going to help. We have to make sure we get that amount of money every year. Every year if we don't spend that money, it can be helpful in compounding.
Create more income streams
When we have multiple income streams, we don't have to worry about our unexpected expenses. Indeed, there will always be unexpected expenses and it can even last for a longer period. Having multiple income streams can make us stay stress-free and handle these unexpected expenses without losing our cool. This is also a safety measure when it comes to financial planning.
Never spend more than needed
We have to be very religious about our spending. The money we earn is not a big deal, we should know how to retain that money or save that money for our future needs. If we spend excess money than needed, we might have to compensate them in the coming months. What if we are unable to do that in the months to come? It can become a big burden for us. We shouldn't be falling into a debt trap. If we can save from the excess spending, we can plan to save them and use them when there is an unexpected expense.