Do You Have a Plan for Unexpected Financial Emergencies? - ICICIdirect

One should prepare for the unexpected. As they say be prepared for the worse and hope for the best. Nobody was expecting a pandemic, but it hit the entire world. The best way to handle these events is to prepare for the unexpected in advance.

Build up an emergency fund to pay for an unexpected medical bill or house repair. Also, have some easily accessible, liquid cash on hand, just in case you need it in a hurry.

Evaluate the Situation

As soon as you realize a financial emergency has struck, take a moment to sit down and carefully evaluate your situation. Running around in a panic won’t solve anything, and it only adds stress. A little bit of panic is understandable you probably have a million things running through your head, and remaining calm isn't one of them. However, the ability to check your emotions and carefully evaluate your situation at this crucial point will ensure you make the right choices and avoid further hardship.

Get health insurance

Many people don't buy health insurance as they are covered by employee group insurance. Certain insurance companies cover ends when you lose your job. It may not be possible to buy health insurance in a hurry. What’s more, you won’t get covered for many illnesses immediately. Insurance companies have a wait period before certain illnesses are covered. There is also a two-year wait for pre-existing conditions. Till then, any hospitalisation expense will have to be borne by you so wisely invest in your health insurance.

Start With an Emergency Fund

The first step for preparing for the unexpected life event is to have a solid emergency fund in place. Your emergency fund should be relatively liquid and should cover three to six months of standard living expenses.

If you are the sole bread winner of your family, you may want to consider building an emergency fund of up to a year. Having a year's worth of funds provides security for you and your entire family. This is especially important if you should lose your job and have a hard time finding another one, or suffer an unexpected illness where you are unable to work for an extended period and will have a gap in your earnings.

It is good to have the money there while you are dealing with other issues such as job loss, illness, or anything that might affect your income.

Take advantage of available assistance

The government has created social programs designed specifically to help people overcome sudden financial hardships. In the event of a job loss, you may be entitled to unemployment benefits. check government schemes and yojana where you can benefit on personal and work front.

Be wise and manage your expenses well

If you can curb your expenses during a financial crisis, you will have less need to dip into an emergency fund. If you have money left over at the end of the month, it can be put to use building and maintaining that emergency fund.

Live within your means.

Keep track of your expenses.

Recognize what is essential and what is not.

Fixed deposits and PPF

Invest your money by saving and keeping aside in PPF and smaller fixed deposits. You will earn interest income and save money for future as well.