Like so many others, you're probably interested in ways to protect your family financially. This is especially important if you're the breadwinner. But if you don't have a firm grasp on personal finances, you might not know where to begin. Fortunately, there are several ways to protect your family financially.
1. Emergency Cash Reserves
Having an emergency savings account is one of the best ways to protect your family financially. A cash reserve can provide funds for a car repair, a home repair or other unexpected expenses. To accomplish this, set aside 10% of your paycheck and aim for a cash reserve of at least 3 to 6 months of income.
2. Renter’s Insurance
Unfortunately, your landlord’s insurance policy will not cover your personal belongings in the event of a fire, theft or major storm. To protect your family financially, ask an insurance agent about a renter’s insurance policy. Coverage varies and policies typically cost less than a dollar a day. Cash from the policy can replace your furniture, clothes, plus provide financial help if you’re displaced.
3. Health Insurance
There is nothing cheap about health insurance. But even if you can't afford the best health plan, something is better than nothing. Health insurance gives your family the opportunity to receive adequate medical care and prescription medications. Without coverage, you’ll have to pay medical expenses out of pocket, which can be a major financial burden.
4. Disability Insurance
You might have to stop working temporarily because of an illness or injury. And if you don't have disability insurance to replace a portion of your income, your family may suffer financially. Talk to your employer to see if you're eligible for disability insurance, or speak with an insurance agent and purchase a policy on your own.
5. Life Insurance
Nobody likes to think about death. But if you have a family, acquiring a life insurance policy is one of the best gifts you can give your loved ones. A life insurance policy not only covers the cost of your burial and funeral, it can replace your income and ensure that your family is able to maintain a certain quality of life. Choose between a whole life or a term life policy. Speak with an insurance agent to determine the best coverage for your family.
6. Get a Will
Like a cash reserve and insurance, a will is an important aspect of protecting your family financially. If you don't put your wishes in writing while you're alive, the state may determine how to divide your assets. This can be a particularly stressful time for your family. Contact an attorney or an estate planner to prepare your will.
7. Avoid Unnecessary Debt
Even if you earn enough to cover all your expenses, too many loans or too much credit card debt can have a huge impact on your family's finances. If the majority of your money goes toward debt repayment, you might be unable to save for a rainy day or adequately prepare for your future. If possible, pay cash for the majority of the things you purchase. And if you use a credit card, pay off your balance in full each month.
Looking after your family financially is undoubtedly a priority, and the decisions you make today have an impact on their future. Therefore, you need to take steps to ensure that they are protected. What steps have you taken to financially protect your loved ones?