Loss of a job is something that is sometimes unavoidable. Many people will face job loss multiple times in their lifetime, which is why it is important to protect your finances against lost income. Here are three things you can do to protect your finances against lost income.
One thing that may help is for your household to have two incomes. If you and your partner both have jobs, then the likelihood of being completely broke when someone loses their job is mitigated. While it may still be stressful, having two incomes helps carry the load. According to EchoPark Automotive, if you have two incomes, you should create a budget that your household will live on and save as much as you can. Having two incomes can help protect your household from the repercussions that occur from job and income loss.
You may not think that disability insurance will protect your finances against your lost income, but it will. According to Murfreesboro Insurance Solutions, you’re much more likely to be disabled during your life than to die young. Because there is such a high risk of becoming disabled, it makes it even more important to have disability insurance. Sometimes you can get disability insurance straight from your employer. Some companies don’t pay for it, so you will have to budget it into your household budget. But because people depend on their ability to work, disability insurance is a must. If one cannot work, the bills cannot get paid. Disability insurance reduces the risk of losing permanent income if one were to become disabled.
Build an Emergency Fund
Another effective way to protect your income is to build an emergency fund. Your emergency fund doesn’t have to be thousands of dollars saved at one time. An emergency fund starts with as little as $20 a month that you set aside into a bank account that is only touched for an emergency. The amount for an emergency fund should be about 3–4 months full expenses, so that if something were to happen and you were not able to work, you would have a cushion to fall onto for a little while, even if it’s not a permanent solution.
Losing income is never a fun experience, but you can mitigate the effects by taking precautions. Preparing your household and your bank account now will make the crisis easier to deal with when it occurs.
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