Create a plan to protect yourself from economic downturns and unexpected events.

Do You Have A Financial Plan?

Most people think of having a "financial plan" as planning for retirement. And that makes sense, after all, the vast majority of us don't have enough saved up to retire early and we might not even be able to afford to stop working altogether. So planning for retirement is usually a good idea. But there's another aspect of financial planning that's far more important: creating a plan to protect yourself from economic downturns and unexpected events.
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In particular, it's crucial to have the plan to help you recover after losing your job. If you haven't been preparing financially for this possibility, you could soon discover that you don't have anything left to sustain you during unemployment. Many people I know who lost their jobs did so unexpectedly and weren't prepared for the resulting hardship. As a result, they had to dip into retirement savings or rely on friends and family to help cover living expenses.

If this situation sounds familiar, you don't have to let it happen to you. You can create a plan that will allow you to weather any financial storm. Here's how:

Keep at least six months' worth of living expenses in a rainy-day fund. Ideally, you'll have two to three times this amount stored away. This way, if you lose your job, you won't have to sell your house or deplete your savings account to survive.

Have an emergency fund set aside specifically for medical expenses. If you or someone in your household experiences a serious illness or injury, you'll quickly find that healthcare costs are astronomical. Even if you have insurance, you could still wind up paying tens of thousands of dollars out of pocket. Save up a nest egg of at least $100,000 in case of such emergencies.

Set up an automatic savings plan. Automatically transferring money into a savings account (or mutual fund) each month helps ensure that you'll never miss the money.

Work on increasing your income. Don't wait until you lose your job to start thinking about earning more money. Start doing some research now and see what opportunities you may be missing out on.

Build up your network of contacts. Networking is essential for career advancement, but it's also a valuable strategy for finding employment outside of the traditional workplace. Make sure you have multiple ways to connect with other professionals in your field.

Consider starting your own business. If you want to make more money, you don't necessarily need to work for someone else. Look into launching a side hustle or building a company of your own.

Create a contingency plan. No one ever gets through life unscathed. You might suffer a serious accident, get diagnosed with a debilitating disease, or lose a loved one in a tragic accident. It's impossible to predict everything that could possibly go wrong, but it's smart to prepare for the worst anyway.

Prepare your family members. If you have children, elderly parents, or others who depend on you for help, you should have a plan in place to manage their needs if you suddenly become disabled or die.

Learn to live within your means. Nothing is worse than realizing that you can't pay your bills because you spent too much money. So build a budget, stick to it, and cut back on your expenses wherever possible.

Remember, it's never too late to save. No matter how young or old you are today, you can always start saving for retirement. The earlier you do so, the greater your chance of getting rich later in life.

Posted Using LeoFinance Beta