Every now and then life likes to throw us an unexpected curve ball. Don't swing and miss – be prepared and smash it out of the park.
We all know life can change in the flash of an eye.
A positive pregnancy test, an unexpected medical diagnosis, or damage to your car can instantly put you on the financial backfoot.
In fact, in 2014, almost half of all Australians experienced an unexpected medical expense, 42% had a higher than expected household bill and 40% had unexpected car repairs.
To pay off these costs, 70% of Australians had to access their savings, while 40% used a credit card. The impact of these costs can be devastating.
However, there are ways you can make sure your finances are in the best shape possible to deal with whatever life throws at you.
In 2014, almost half of all Australians experienced an unexpected medical expense, 42% had a higher than expected household bill and 40% had unexpected car repairs.
Create an emergency fund
An emergency fund, or rainy day fund, is a pool of money that you set aside to cover an urgent or unexpected cost.
It works as a savings buffer to make sure you always have some ready cash available to access, without having to worry about breaking a term deposit, or having to borrow money. Basically, it gives you some breathing space.
Setting up an emergency fund is easy. Just set aside as much as you can each month – even small amounts like $20 or $30 can be enough – and keep it separate from your usual cash or savings accounts.
Even consider opening a savings account which offers you rewards if you put aside a certain amount each month, as this can act as an incentive not to touch the money.
Set up a budget
A solid budget is the centre of any good financial plan, and it can make dealing with unexpected costs more straightforward.
Through a budget you can easily see where money is coming in and going out on a day-to-day basis which means, should an unexpected cost occur, you’ll quickly be able to see where you might be able to make savings.
It also means that, if you do have to borrow money, you are in a much better place to rapidly plan to repay it.
Invest in insurance
Insurance can give you the peace of mind to pay for large unexpected costs, like a major health incident, or a natural disaster.
It can also cover smaller costs, like veterinary bills, or even your mobile phone or tablet.
While premiums and monthly repayments may seem significant, they’re nothing compared to the amount you may have to pay in the event of a disaster.
As always, when taking out insurance, make sure you understand what it will cover and under what circumstances.
Your next step
Acknowledging you're unprepared isn't enough. You need to start taking steps to ensure you and your family are prepared for life's future curveballs.
So make a checklist. Get in touch with your bank and open that savings account, ring around and grab a few insurance quotes, and start drafting up that budget today.
If you need further financial advice, check out our blog. And don’t be afraid to speak to your employer, they are there to offer support and help you get on top of your finances.