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Credit Wise
(featured column)
Predicting
Your Financial Future
by
Jennifer Delcamp
As a kid, I
loved to play with a Magic 8-Ball that was supposed to hold legendary fortune
telling power. I’d sit around for hours asking it exactly what the future
would hold for me. Would I be rich? (Outlook
not so good). Would I marry the man of my dreams? (Reply
hazy, try again). Would I be happy? (You
may rely on it). I think we have all wished that something or someone
could tell us exactly what type of future we could expect. Some of those magic
powers possessed by the 8-ball must have rubbed off on me because I am about to
accurately predict your financial future. I won’t even charge you $3.99 per
minute. Are you ready? More...
Your car is going to need repairs and tires every few years. You
will need to buy new clothes for you and your family. Your air
conditioner/appliances/roof will need replaced or repaired. The cost of living
will rise. Your pet will need to go to the vet. You may lose your job. You or a
family member will get sick and need medication.
So, am I really psychic? (Don’t
count on it). However, my predictions are right on the money. Most of
us go through life with our fingers crossed, hoping that nothing goes wrong.
Even if you are the luckiest person alive, something has to go wrong sometime.
When it does, it’s probably going to cost you.
If you just accept the fact that something
is inevitably going to happen that wasn’t in your plans, you will be able to
deal with it much more effectively. Here’s how:
 | Save
for periodic expenses: Items such as car repairs, home repairs,
vet bills, medical bills, clothing, holiday gifts, and others may qualify as
periodic expenses. You may not purchase them every month but when you do
have to pay for them, they can be significant costs. Using our Free Annual Budgeting Worksheet,
estimate how much you will spend over the next year in each
category and divide that amount by 12.
Now, save that amount in a savings account each month. When
you car tag is due or the dog needs shots, you will already have that amount
set aside. You won’t need credit cards or a loan to pay for it and it
won’t throw off your budget.
| Save
for a crisis: While none of us want to live in constant fear, the
fact is that sometimes really bad things happen to really good people.
Catastrophes such as major illness, various acts of nature, or just a jerky
boss can cost any of us our job at any time. If possible, it is advisable to
have 3-6 months of living expenses in savings. If the worst happens, you
will have some time to go to Plan B and recover without further devastation.
| Get
covered: If you don’t have proper health, life, home, and car
insurance, you are taking a huge risk. In a split second, a major medical
event or accident could change your life forever. When everything is going
well, it’s hard to stomach the idea of paying your hard earned dollars to
an insurance company “just in case” something might go wrong. Trust me,
if something does go wrong, you will be so glad that you planned ahead and
were properly insured. For example, my dad suffered a major, unexpected
medical problem earlier this year. If it weren’t for his health insurance,
my parents would have been buried under close to a million dollars worth of
medical bills. It’s important to contact your insurance agent to make sure
that you are protected.
| Plan
for retirement: Whether you are age 4 or 40, if you hope to live
past the age of 67, you are going to retire someday. Don’t wait until your
retirement party to start planning how you will survive. You certainly
can’t count on Social Security to support you. Talk to your employer to
see if they have a retirement plan. Many employers offer 401K plans. They
may even match a percentage of your salary. Not only will you be giving
yourself an instant raise by taking advantage of your employer’s
generosity, you will have money to help you through the Golden Years. If
your employer does not offer a retirement plan (or if you want to diversify)
contact an investment advisor for other investment plans.
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I know from personal experience that it is
easy to get caught up in the moment and not think too far ahead. However, when
it comes to your finances, living spontaneously isn’t a luxury that you can
afford. You can either live in fear of what will happen when something goes
wrong or you can start planning for the inevitable. Don’t wait until disaster
strikes to start planning for how to deal with it. If you plan for the
“unexpected” unfortunate events, the future will be a lot brighter. You
don’t need a Magic 8-Ball to tell you that. (It
is decidedly so).
* * *
Copyright
© 2005 by Jennifer Delcamp. All rights reserved. Want more
money-saving tips? Get a FREE Subscription to our monthly
newsletter!
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