Vail Daily column: Are you prepared for financial disasters?
“Be prepared” is the Scout motto, and it’s also pretty good advice for anyone seeking to guard against various disasters — including financial ones.
Here are some events that can have serious financial consequences, along with suggestions on preparing yourself to best handle them:
Loss of employment: If you were to lose your job, your family might struggle financially to make it until you’re employed again. To protect against this potential threat, try to build an emergency fund containing three to six months’ worth of living expenses. That’s a lot of money, so it will be challenging to build such a fund — but try to contribute something each month to a liquid, low-risk account. Without such an emergency fund, you might be forced to cash out your 401(k) or other retirement plan to pay for your living expenses during your period of unemployment.
Loss of health: If you fall ill or become injured, you might be out of work for weeks or months. Your employer may offer you some type of disability insurance as an employee benefit, but it might not be sufficient. You may also want to purchase an individual plan to cover as much of your after-tax income as possible. You’ll have the flexibility to create a policy that is tailored to your needs, budget and overall financial goals. However, policies vary widely in cost and benefits provided, so you’ll want to shop around for the coverage that best meets your needs.
Loss of life: Death may be an uncomfortable topic to discuss. However, due to its unavoidable reality, it is worth considering; if you were to pass away, it would be emotionally devastating to your loved ones and it could also be financially catastrophic. Would your family still be able to pay the mortgage? Could your surviving spouse afford to send your kids to college? Without life insurance, your death could leave your family without the ability to cover financial obligations. The exact amount you require depends on a variety of factors, such as your family’s expenses, the size of your family, your family’s savings needs over time and so on. Generally speaking, you can choose between two broad categories of insurance: term and permanent. Term insurance, as the name suggests, is designed for a specific number of years and only provides a death benefit. Permanent insurance is typically more expensive, because, in addition to the death benefit, it offers a savings component. A financial professional can help guide you through your options to determine which one is appropriate for your needs.
Loss of property: If you own a home, you already have homeowners insurance, but it doesn’t hurt to periodically check your policy to make sure it’s kept up with any improvements or additions you’ve made to your house or other property. If you do not have enough coverage, and had to pay out-of-pocket for some major damage, you might be forced to dip into your long-term investments. And while you’re making sure your property is covered, you might also want to consider adding umbrella coverage, which can provide extra protection to you in case someone is injured at your home or even at an event at which you may be in charge, such as a Scout meeting.
With luck, you can avoid all the threats to your financial security and that of your family. But you can’t count on always being lucky — so we recommend that you take financial disaster preparedness measures soon.
This article was written by Edward Jones for use by your local Edward Jones financial adviser. Edward Jones and its associates and financial advisers do not provide tax or legal advice. Tina DeWitt, Charlie Wick, Kevin Brubeck, Bret Hooper, Dolly Schaub and Chris Murray are financial advisers with Edward Jones Investments. They can be reached in Edwards at 970-926-1728 and in Eagle at 970-328-4959 and 970-328-0361.