100 Words On: The Importance of Having a Financial Back-Up Plan

Everyday, people lose their jobs, become seriously ill, and suffer other hardships that strain their household finances. Even so, a sobering study by State Farm found that 55 percent of those surveyed don’t have a back-up plan for weathering a long-term financial crisis that may occur due to unexpected circumstances. I have three back-up plans: a) adequate life, health, home and auto insurance; b)   an emergency fund with six months of living expenses; and c) albeit small, a secondary source of income.

The bottom line: Life happens. It’s your responsibility to prepare as best you can for whatever it throws at you.

Photo Credit: US Army Corps of Engineers Public Affairs

Comments

  1. 1

    nansuelee says

    Great post, especially the “Bottom Line.” Working in a credit union we see daily what happens when folks do not have a plan or take to heart that it is their responsibility when stuff happens.

  2. 2

    says

    Stuff always happen and having some reasonable plan to handle it allows me to sleep at night. In addition to the usual insurance, I have built up a lot of sick time (over 100 days) which I can use for retirement in 6 years. Keep a low cost lifestyle also helps if something happens.

  3. 4

    Len Penzo says

    @nansuelee: I’m glad you enjoyed it — I hope it wasn’t too long. ;-) Seriously though, like I said, although some catastrophes will overwhelm us no matter how much we prepare, I still believe it’s our obligation to do the best.

    @krantcents: Sweet deal if you can get it. I think my employer allows us to cash in 25 percent of our unused sick time upon retirement.

    @40: LOL! I guess that is a back-up plan, isn’t it?

  4. 5

    says

    It was interesting, I was having a conversation with a co-worker from India one day at lunch. I had a hard time understanding him, but I think he said that where he is from, it is a given that people all focus on having a secondary income, just in case something happens to the first income. Very interesting that it is just a given that a second income stream will be created by one person.

  5. 6

    says

    Problems can and do happen in people’s lives. While the chance of any one problem might seem small, when you mathematically assess the chance of just ONE of them occurring, it’s a different story. Stuff happens. So be prepared, even though you might not know exactly what might be coming down the pike!

    • 7

      Len Penzo says

      Yes, those probabilities do add up, Wise Squirrel. The odds are we’re all going to get hit the “reverse lottery” at least once or twice during our lifetimes, so it pays to be prepared.

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