Serious money traps to avoid
November 7, 2009 by Jennifer Chait
Filed under finances, financial matters
There are plenty of money traps out there, but some are far more significant that others. Two biggies to watch out for include:
Assuming you’ll always be a two income family and not planning for survival as a one income family:
SO many things can happen to a two income family. Couples break up – yes even when you don’t see it coming, people get sick and can’t work, people get pregnant and make a decision not to work, layoffs occur, and sadly sometimes the worst happens and one of a couple dies. The problem is that too few people plan for one income living, when they should be planning now.
You should ALWAYS have a good emergency plan in place that includes many months of expenses saved up, life insurance in place for both mothers and fathers, and a general idea of what you could do to make more money or cut expenses should the worst happen. It’s not fun to think about this stuff, but if something does happen you’ll be glad you did.
Not being prepared for a medical emergency or crisis:
In general, most families are luckily healthy and doctor visits involve basic care only. However, if someone in your family did get seriously sick or injured could you afford it? Research out of Harvard found that 62% of all personal bankruptcies in the U.S. in 2007 were caused by health problems—and 78% of those filers had insurance. This partially plays into the trap above, not planning for one income, but there are other issues at stake as well.
If you want to manage medical emergencies you should splurge on health insurance above almost all else. Yes it can cost more on an on-going basis, but should something happen you’ll be super glad you did buy lots of insurance. However, it’s not enough to simply buy more health insurance, you also need to really read the fine print and choose plans that are right for your family. You also should consider disability insurance so you’re protected ongoing should you be hurt and unable to work. Additionally prevention is one of the cheapest solution here. Stay healthy, exercise, eat well, and be smart – i.e. don’t drive drunk.
[image via stock.xchng]
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