Financial Backup Plan (Emergency Financial Assistance):
Plans are made, structured, documented and weighed with respect to their pros and cons. Then you select the most desirable plan to work with. Also there’s a financial backup plan in case the original one doesn’t work out as planned. People call it a fall-back option. The financial backup plan or emergency financial assistance is not documented as detailed as the main plan, though. However, you need to partially document the plan B. Your personal finance is just another project, there’s a fine line between your work project and a personal finance management.
You might want to ask the following questions to yourself – should I have a back plan for my personal finance management? What if there’s a new family member? What if someone leaves us? What if a disaster strikes? What if economic meltdown occurs today? What if I lose my job due to recession? To cope up with situations like these, you need to have a plan B and ensure well being of your family.
Why will you need a Personal Financial Backup Plan?
The death of primary or one of the breadwinners – This is a worst case scenario a family can go through. This one incident can turn your lives around. Begin a practical citizen, you should check the nomination and beneficiary info of your working spouse’s investments, also know about the primary bread winner’s life insurance coverage and will it be sufficient to sustain lives of your family?
Divorce – As vicious as it is to personal life, it also affects your finances disastrously. To avoid any potential aftermaths of divorce it’s advisable that both the entities must come in terms with each other and understand family’s finances, investments and checking account details to proceed accordingly.
Job Loss – The major source of income is blocked. What will you do now? You’ve to have an extensive plan so that you suffer minimum hardship until you find the next one.
Economic Slowdown – Crisis at global level is not in your hand, but your security is. Talk to experts about an alternative plan or financial backup plan during economic shutdowns. Millions of people lost their job in 2008, investments were diluted and everything was less than its original value. Are you prepared for to tackle situations like these?
Severe Illness – Illnesses is almost unavoidable. A tiny mosquito bites you and you’re likely to suffer from a deadly disease. The ability to work is degraded exponentially during illness. This further causes a serious threat to your ability to manage finances. You need a safe and sound protection during your sickness to cover your bills.
Structure of the Financial Backup Plan:
Insurance, beneficiary, nominee and alternative investment or savings options should be the centre of your backup plan. Your backup plan must also consider the option for an alternative source of income during job loss or any economic crisis. When in dire need, we tend to forget the essentials, so always ensure to cover the needs of your family. Most importantly, this financial backup plan should be in writing. Writing it down and making changes from time to time will ease your work during an emergency.
Make a rough list of various financial disorders that you may face. Cram, memorize or whatsoever you do, but try to remember your insurance coverage information as much as you can. This includes yearly out of pocket maximum your health insurance requires or the absolute max limit of your flood insurance coverage.
To start with you can have a word with professional experts on the matter, and make sure that there is no potential threat to your finances, like ask your lawyer and discuss the possibility of a lawsuit against you, check if your insurance is sufficient enough to cover your needs. Check if your financial plan allows you to access sufficient amount of fund during the time of emergency.
You’ll have to re-memorize the coverage and update yourself regularly to keep up fast pacing economy. If not remember then store the information at easily accessible place. Be updated on what’s happening around you, at your work and in the economy. Keep an extensive network of friends, colleagues and well-wishers. These contacts can help you a great deal during the time of crisis; say they might help you find a job!
Know your bail out options during the tough times; it’s better to have an alternative housing arrangement plan if your area is sensitive to quakes or any other natural calamity. Even if it’s not, you never know. Your financial planner and investment advisors should be able to tell you about alternate investment options and the nature of your investment liquidity, in case you need cash urgently.
- Tutorial Course - Financial Planning Basics For Beginners -
» e-Learning Chapter 1: What is Financial Planning? Definition, Benefits and Importance
» e-Learning Chapter 2: Different Types of Financial Planning Models and Strategies
» e-Learning Chapter 3: Determine Financial Goals – Assessment, Budgeting and Goal Setting
» e-Learning Chapter 4: Benefits of Top 5 – Key Steps Involved in Financial Planning Process
» e-Learning Chapter 5: What is Optimism Bias – Definition, Effects on Financial Decisions
» e-Learning Chapter 6: What is Personal Financial Planning? Definition, Examples, Process and Template
» e-Learning Chapter 7: What is Business Financial Planning? Definition, Examples and Process
» e-Learning Chapter 8: What is Financial Planner? Definition, Scope and How to Become a Financial Planner
» e-Learning Chapter 9: Your Rights and Responsibilities as a Financial Planning Client
» e-Learning Chapter 10: Strategic Planning and Execution of Financial Plan
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» e-Learning Chapter 11: Top 10 Worst Financial Mistakes to Avoid or Common Errors in Financial Planning