There are some basic needs we all share, regardless of age or circumstances. If any of those basic needs are uncertain, we quickly begin to panic. Our survival instincts take precedence and our whole being becomes focused on finding stability. It truly affects our ability to concentrate, problem-solve and relax.
If you have ever faced uncertainty about a safe place to live or access to nutritious food, you understand the level of anxiety and fear that comes with it. It can be very challenging to be creative and productive. Those things we might take for granted are the same things that can quickly derail our lives.
Over the next several posts, I’ll be writing about these basic needs that must be considered as you build a strong foundation for your financial wellness. My goal is to create awareness about areas you may not be considering and help you evaluate your current plans.
First off, calculate how long could you make it on your available cash funds. Let’s look at several scenarios. One scenario may be a loss of work, such as a lay-off or getting fired. As you begin to figure out your next steps, how long could you make it on your available cash and credit? Keep in mind that once you are unemployed you are no longer eligible for a loan or credit.
Another scenario may be a loss to your property, such as a fire, flood, theft or collision. Have you inquired about different types of insurance to protect your things? How long could you manage the disruption, increase in expenses or cost to replace or repair your things? Without an insurance policy, you are on your own to pay for a temporary living space, repairs or the cost of a rental vehicle.
It’s important to pace yourself and build your access to cash and credit as your income increases. Review your obligations on a regular basis to make sure you are not taking on too much. Develop a plan of action for possible scenarios and know exactly which resources you could use.
Action Steps: Contribute at least 5% of your income each pay period to a separate account. Build this up to be able to replace at least three months of your minimum monthly expenses. Keep it liquid – checking or savings account.
Some people feel more comfortable keeping some cash at home, in a safe, or a safety deposit box at a bank. A few downsides include – cash can be stolen, damaged or burned and cannot be fully replaced; banks may be closed when you need to get to the cash in the safety deposit box.