Fireproof your finances: Prepare for the unexpected

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The post is sponsored by Firths.

What would happen if you lost your job or had an accident and couldn’t work?

What if one of your kids got sick and you had to quit?

Would you be able to pay the mortgage, the school fees and keep the household running?

29% of Aussie households report savings of less than $1000 and nearly 60% have less than $10,000 saved (source). Based on average household expenses that means most families would last less than three months without income and many would last only a week or two.

That’s pretty scary!

So what can you do you fireproof your finances and prepare for the unexpected? A lot actually.

Here are some of my top tips and some of the things we’ve been trying to do to help prepare our finances for the future. Whatever that may hold.

How to prepare your finances for the unexpected

Stay out of debt

Australian’s love their credit cards. We pile on thousands of dollars each year and many people regularly have an outstanding balance.

The last thing you want in a crisis is having debt hanging over your head. Make it a habit to keep your credit card paid off. Don’t put things on it that you can’t afford and use it wisely.

Save regularly

Saving isn’t exciting, it isn’t sexy and it often isn’t fun, but it is smart.

If you don’t already have a savings habit, start one. Set a budget and instead of spending the excess, save it. Set a goal and work towards it. Not just savings for a holiday or a new couch, save for the unexpected too.

This article on how much you should have saved has some good guides, and a general starting point is to save three months of living expenses. This is usually the waiting period for many life and income protection insurances and a good amount to tide you over while you work out the next step.

Get the right insurances

In reality you can’t save for every outcome and insurance is the next best protection for the unexpected. Make sure you have sufficient life and income protection insurance. Know what the waiting periods and conditions are and have a plan for how you’d survive until it kicked in.

You can often gain insurance through your superannuation but make sure it meets your needs. A financial planner can help you in this area.

Know where to go for help

Many unexpected events that send finances into a tailspin are the result of an accident or injury. If this is the case then make sure you’ve explored all options for compensation. Companies like Firths can help you determine if you may have a claim and help you navigate the process.

How would you cope with the unexpected? Are your finances ready?

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