Are you financially prepared in the event of a true emergency in your life? Life can throw a curve ball your direction, so you need to be ready to strike back if one comes your way.
An emergency fund is vital if you want to recover from an unexpected event in a short amount of time. With the new year coming up, think about setting money aside for the following life changes you should be financially prepared for.
Emergency medical expenses
Your health insurance may help cover the cost of a short trip to the emergency room, but what about an extended stay? Most health insurance companies only pay up to a certain amount of money for your stay in a hospital. An extended stay could wind up costing thousands of dollars.
The location of the hospital plays a big factor in how much your medical expenses will cost. It is no secret there are staggering differences in cost amongst hospitals within close proximity to one another. That means you should prepare for costly medical bills.
Plan to cover expenses for at least a few night’s stay in the hospital. Last year, the Los Angeles Times calculated it costs an average of $3,949 in the U.S. for a one-day stay in the hospital.
The average cost of an overall stay in the hospital for a patient in the U.S. is $15,734. Consider this amount when figuring out how much you should save.
A job loss can make a big impact and change the course of your life. Finding a new job can take months. If you have no luck, then you may need to change career paths. It is no secret that the U.S. job market has turned into a temp worker’s world. The unemployment rate is steadily decreasing, but no job is guaranteed. Everyone is vulnerable to losing their job, even if their employer still wants to keep an employee working. Other businesses have no other choice but to layoff workers in an attempt to secure the company’s financial future.
Save so that you can live for three to six months without financial worry. The median household income was at $52,100 as of June this year. Earnings for three to six months based on the median household income is $13,025 to $26,050. Use that savings range as an indicator of how much you should save to prepare for a job loss.
Although it’s an unpleasant thought, it’s important to be prepared and be able to make proper arrangements in the event of an untimely death. Paying for a funeral without life insurance can cost upwards of $10,000. The National Funeral Directors Association estimates that it costs around $6,600 for a traditional funeral with embalming and a metal casket. Cemetery services can cost another $3,000 or more. Financially prepare your family to cover the expenses of a funeral that costs at least $10,000.
Saving for a funeral is only half of the battle. What if the person that died was the main source of income for a family? A breadwinner should consider getting life insurance to secure his or her family, should someone unexpectedly die. Either way, with or without life insurance, it’s important to have enough money saved up to cover living expenses for six months to a year.
How to save for it all
It is impossible for you to save enough money to cover multiple emergencies at once. One fund is probably all you’re going to need access to if an emergency arises. Dedicate as much as you can afford to your emergency fund. The bigger cushion you have, the less prone you are to financial ruin as a result of having to pay for emergency situations such as medical expenses or bills after losing your job.
If an abrupt situation should find its way into your life, you can neutralize it right away because you planned properly.