In your financial life, as in all other areas of life, it is important to nurture your resilience—your ability to recover from loss, disappointment, and difficult circumstances.
From a practical perspective, financial resilience involves laying a foundation of economic protection. From an emotional perspective, financial resilience involves increasing your confidence in your ability to prepare for and deal with life transitions and financial setbacks.
Without a doubt, the better prepared you are to meet financial challenges, the quicker you will recover both economically and emotionally. Here are ten tools that you can utilize to provide financial protection and peace of mind:
- Emergency Fund—This is money that is set aside in a savings or money market account to be used in case of emergency. At the very least, save enough to cover the costs of unexpected car repairs, emergency travel, or replacing a broken major appliance. Ideally, this account should grow to the equivalent of three to six months living expenses in case income is lost or reduced.
- Auto Insurance—This insurance is purchased to 1) cover legal liability resulting from ownership and/or operation of an automobile and 2) physical damage to and/or loss of your automobile.
- Homeowners/Renters Insurance—Home-owners insurance typically covers your personal liability as well as the structure and contents of your house and out- buildings. Renters insurance usually covers personal property in a rented house or apartment and personal liability.
- Umbrella Insurance—This insurance covers financial loss due to personal liability that exceeds the personal liability coverage offered through other insurance such as auto or homeowner policies.
- Life Insurance—Life Insurance is typically purchased by individuals who have dependents. At the time of death of the insured, the death benefit is available to the designated beneficiaries.
- Health Insurance—This insurance helps individuals pay the costs of regular health care and protects them against the catastrophic health care costs that can result from treating illness and/or injuries.
- Disability Insurance—This is a form of health insurance that provides periodic payments to partially replace income lost due to illness, injury, or disease.
- Long-Term Care Insurance—This insurance pays for the long-term care of an individual who, as the result of physical or mental disabilities, can no longer accomplish the tasks of everyday living such as bathing, dressing, or eating.
- Durable Power of Attorney—This legal document gives direction as to whom you choose and trust to make your health care and financial decisions in the event that you are temporarily or permanently unable to do so.
- Will—A will is the first step in estate planning. It is a legal document that specifies how and to whom you would like to have your assets distributed at the time of your death.
Reprinted by permission of Money Quotient, NP
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