We tend to put off lots of life planning basics we need to protect our family and lead to big life decisions: You train for a career, you choose a life partner and plan your future together, maybe you save up to buy a home. We plan for these positive changes, but what about pitfalls that can happen? We all need to plan for those contingencies so that the life we’ve worked so hard to build stays protected.
There are some major life events that we don’t see coming but hit hard when they do. The last thing you want is to find yourself facing a loss or serious illness without a plan in place.
Loss Of Spouse
The unexpected death of a spouse has major financial implications for your family. This is especially true if you have kids, and even more so if one spouse is the primary income earner.
Solution: The two primary considerations here are estate planning and life insurance. U.S. News explains the basics of estate planning, such as having a will that designates who would have guardianship of your children and who your assets would go to. If you or your spouse were to pass away without having a will, the state would end up making these decisions for you. For specific questions and step-by-step assistance, your best bet is to find a financial advisor who can help.
As part of your estate planning, it’s also good to look into life insurance. You may benefit from purchasing a 30-year term life insurance policy as a way of ensuring your family would be provided for if one partner passed away. Families often choose a 30-year term policy because it covers the average period when major costs occur, such as your mortgage and children’s college education.
Changes In Employment
You should also plan for the possibility of one partner losing a job or becoming injured and unable to work. In the best-case scenario, you would be able to find another job that replaces your income, but you can’t count on that happening.
Solution: The best way to protect your finances from unexpected job loss is to have an emergency fund. The Simple Dollar recommends opening a savings account that’s easy to access online and transferring a set amount into it each month. This is the easiest way to get started and stay consistent with building up your savings.
If you ever do lose your job, it’s good to know what resources are available to you. You may be eligible for unemployment insurance benefits and health insurance through COBRA. Some people should also consider purchasing disability insurance. If you work in a profession where an injury is more likely, or if your job requires physical work, you should definitely look into your options for disability insurance. You still need an emergency fund because insurance doesn’t cover 100 percent of your lost income, but it can be a valuable resource if it’s ever needed.
If you’re looking for opportunities to increase your earning potential, an MBA can give you a vehicle that will take you farther and provide numerous opportunities along the way. An MBA can increase your financial capacity greatly and give you the chance to build a future where your family is taken care of without worry. Another great benefit of this type of higher education is learning leadership skills and qualities that will be monumental in establishing a strong professional network that can lead to many future prospects.
The smart way to manage your money is to set a budget for regular spending. We can anticipate most of our regular expenses, but even with a good budget, major expenses can pop up unexpectedly. Medical bills, car repair, and major home repairs are some of the most common ones to plan for.
Solution: Just like preparing for job loss, this is another life event you can cover by having a safety net. You can have a general account that’s set up for an emergency expense, but you may also want certain special funds. For example, your kids’ college education is a major expense that you can save for over time with designated accounts that give you tax savings, such as 529 accounts. Similarly, opening a health savings account is a way to save for medical expenses while getting a tax advantage.
Utilizing all of these resources is the smart way to have a comprehensive life plan. Don’t hesitate to consult the right professionals who can help too. Planning for the unexpected may not be something we want to think about, but it’s a crucial part of protecting your family’s future.