It was a great weekend for college football! During the weekend, and throughout the season, I have picked up on a new phrase sports announcers like to toss out after turnovers. They refer to a quick turnover by the other team’s defense as a “sudden change,” situation and it appears statisticians are even looking to track how well team defenses react in sudden change situations.
In the world of personal finance these “sudden change” situations look less like interceptions and fumbled snaps, and more like job layoffs, illnesses, and losses of a loved one. Like any good defensive coordinator, you have to be prepared for these situations.
Be Prepared Financially
Have a solid emergency fund in place. I have seen first hand the devastating effects of a major illness on a family’s financial situation. Imagine being unable to work for the next 12 months because of a major illness or injury, and having very little to cover the six-month waiting period required by most disability insurance plans. Suddenly, there is no money to cover the mortgage, the car payment, the utilities, and even most grocery items become optional.
Insure yourself by saving at least six months of expenses in a high interest savings account. I used to subscribe to the standard 3-6 months worth of savings advice, but after my own family’s experience I now recommend a full six months (unless you have a stellar short-term disability plan).
Put regular expenses on autopilot. I am a big proponent of using auto-drafts for regular, monthly expenses. Things like utility payments, recurring subscriptions, etc. may be put on auto-pilot which helps avoid late payments, especially in an emergency situation. One note about auto-drafts; I do not recommend using the draft service provided by credit card companies and other creditors. If you fall behind on your payments the creditor might clean out your account to collect the debt, and this is especially problematic if you bank at the same place you owe money. Just something to think about.
Be sure you have a solid long term disability plan. Life and health insurance are two of the most highly recommended financial products out there, and for good reason. However, chances are much greater that one of us will become disabled before we die. In this case, it is vitally important to have a disability insurance policy in place so that at least a portion of your income continues even if you become disabled.
If you are currently employed with a large employer, chances are you have the opportunity to participate in group disability policy (some employers even pay for some or all of the premium as part of employees’ benefit packages). If you are self employed, or currently unemployed, I encourage you to shop for a disability insurance policy on your own.
Have Financial Records in Order
Safely store insurance policies, and share the location with a trusted friend or loved one. In times of crisis it might be difficult to remember where you have stashed insurance policies and other important financial documents. In fact, depending on the severity of the situation, you may not be able to tell anyone the location of the documents. For this reason, it is a good idea to tell a loved one where you have stored insurance policies, wills, and other important files.
Create a “Just in Case” file. In addition to the location of important documents loved ones may also need to know things like account numbers, bank account information, info on outstanding debts, etc. One of the things that has really come in handy during my Mom’s medical crisis is that she created a document that listed all account numbers with instructions for handling her financial affairs. We never dreamed we would have to refer to it, but it has been a big help during her lengthy hospital stay.
Be Prepared Physically
The better shape you are in, the easier it is to handle stress. I had good intentions of losing some weight as the weather cooled in the fall season. However, the crisis that hit our family kept me out of the gym, and in the fast food restaurants and hospital cafeterias. In fact, I gained a few additional pounds during the first eight weeks. I went through a range of emotions during those first few weeks, but the one thing that was constant was the amount of stress I was feeling. I couldn’t sleep, I couldn’t relax, I was always tired, and I felt myself slipping into a serious bout of depression.
Then it occurred to me that my poor physical health limited my ability to be a good caretaker. In fact, it interfered with my handling of the entire event because I wasn’t in shape to withstand long hospital stays and keep a tough schedule. I guess I wasn’t as strong as I thought I was. When I recognized this, I immediately began to make time to hit the gym, and have been eating a cleaner diet–even opting for things like salads if I must eat on the run. I feel better now, and am not nearly as stressed out as I was there for a while. Lesson learned–stay ready so you don’t have to get ready.