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5 Types of financial emergencies

Plan now to avoid stress

Workman installing a roof on a house
Though infrequent, emergencies can potentially throw your life and your finances out of balance for a considerable time. That’s why it’s crucial to equip yourself with the knowledge and resources to navigate these emergencies now rather than trying to recover from a situation after it happened.

Jobloss icon Losing a job

Unexpected unemployment is never a pleasant experience, but many things can be done to soften the blow, both before it happens and while you’re experiencing it. First, when you’re employed, it’s important to always to be aware of other market opportunities. You can accomplish this by actively or passively searching for new positions at other companies and fostering a robust professional network. Be sure to regularly audit your accomplishments in the current job so you can incorporate them into future job applications. Additionally, having a savings account funded with enough money to cover your basic household expenses for a couple months will allow you to find another job without the stress of being unable to pay bills.

Additionally, you could look into other pathways for establishing a safety net if you lose your job. Research portable benefits that will allow you to maintain your benefits between jobs, and consider tapping into or consolidating the funds of your employee-sponsored retirement plans in the event that you need additional funds until your next work opportunity.

Medical icon Medical bills

A new study from the Kaiser Family Foundation found that almost 23 million people, or 1 in 10 Americans owe significant medical debt. Trips to the hospital can pack a heavy hit on your budget, but that doesn’t mean they have to affect day-to-day financial decisions. If you haven’t already done so, we suggest opening a Health Savings Account specifically for medical expenses if you have a High Deductible Health Plan. These accounts deliver a wide range of benefits, but the main one being you can have a cushion for situations like this. When you stick to a savings plan long enough to accumulate a decent rainy day fund, a sudden medical bill doesn’t add as much stress to an already stressful situation. You should be aware however, that there are limits to the amount of money you can put into these types of accounts.

We also encourage you to research the payment plans your hospital or healthcare care providers offer. Although everyone's financial policies differ, many institutions will accept low monthly payments to accommodate unique circumstances.

Medical debt is now being treated differently when it comes to credit reports and scores. As of mid-2022, the three main credit bureaus have removed medical debt from their reports. VantageScore will be removing medical debt from score calculations in the back half of 2022. This is great news for those who have had challenges paying off medical debt. For additional help with these bills, you may look to hire a Medical Bill Advocate. These are trained individuals with experience reading medical bills and know common costs for care. They may be able to spot billing errors and overcharging. Just be sure to consider the costs of hiring this type of help and fully understand what service(s) they’ll be proving. 

Home Repairs icon Unexpected home repairs

Home repairs are another common unexpected expense. A small sink repair can cost an average of $200. A larger repair such as a roof replacement however, could potentially cost nearly $10,000. The average spend on a home emergency though, is about $2,321. In situations like this, it’s always a good idea to have a network of trusted repair services you can call on to do the work at a reasonable cost. While there are plenty of sites that will connect you with trades professionals like angieslist.com, you also likely have a local Facebook Group where your neighbors promote trade professionals who have done a great job for them. Further, it doesn’t hurt to have options in place so you can find the best choice for your need. To help cover larger repairs or home improvement projects, First Tech offers home equity loans that can help.

Car icon Unexpected car repairs

Much like unexpected home repairs, car repairs can range drastically from a small $15 oil filter replacement to a $1,000 engine tune-up. You can prepare for car repairs with additional car warranties, or by building a savings account and knowing your repair service options when the time comes. Unfortunately, because of the complexity of modern cars, a lot of consumers report excessive or misleading charges. Be sure to read the mechanic’s customer reviews, get references from friends or family, and do some preliminary research on your car’s particular issue to understand the problem and discuss it with the mechanic.

Family icon Death in the family

When we lose someone we care for, it can put a lot of weight on our shoulders, in terms of both emotional impact and financial. In many ways, you can’t prepare for situations like this, but you can develop tools to help handle it.

If you’re able, you should try to speak to your older loved ones to make sure you understand what they want to happen to their money in case something should happen. Read our article for some tips on how to have this conversation.

In regards to funeral services, it’s not too early to establish a budget and research funeral homes in your area. It’s important to be realistic while also respecting the budget you established. Unfortunately, some businesses have been known to leverage mourning people’s guilt so that they’ll spend more money. Learning about the services and costs in your area before you need them is an important way to avoid being taken advantage of during a trying time. 

No one wants to think about these things happening to them, but the truth is we all need to be prepared for financial emergencies with some careful foresight. However, the common thread in preparing for all of these situations is building a savings account. When you have built up personal savings, you can handle unexpected expenses knowing that it doesn’t put your larger finances at risk. We’re all in for some unexpected expenses in our lives, we just don’t know when or what. To learn more about your options or start a savings account, schedule a consultation with one of our financial professionals.