Planning for an Emergency

By: Sarah Horner

April 27, 2009

Hopefully it never happens to you, but it is more likely than not that at some point in time your family may face a financial Emergency. This is why it is particularly important to plan your family budget ahead of time so you have the means to avoid potential disaster.

This article from Ezinearticles.com discusses emergency planning for your families budget.

"While insurance is always an excellent source of funding at these times most often it is not sufficient to cover the entire need. Consider what it would take for you to be able to continue on in the lifestyle you currently enjoy. Don’t buy insurance according to your current need only; inflation is approximately 4% annually so compute that into your planning figures as well.

Often times families insure only the bread winner but what would happen if the family caregiver died? Would you be able to afford to hire someone to care for the children while you continued to work? What about if your child died? How would that affect your zest for life and work? Too often we fail to evaluate all the possible reasons for, what I call, Contingency Plan Funding. Taking the time now can save you much heartache and stress later.

When looking at ways to invest your resources besides insurance you may want to consider annuities and retirement plans. IRAs, Roth IRAs, and Annuities will allow you to put money aside that, in emergency, you can tap into. IRAs are tax deferred and you pay taxes only on the earnings, while Roth IRAs are taxed up front only. With all of these plans you will face penalties for early withdrawal unless you have certain types of emergencies. However with annuities you incur what is considered a ‘loan’ that you will have to pay back or those penalties will hit you hard when you annuitize.

If you don’t have a Financial Planner, find one! If you need advice as to who to hire to help you review your Contingency Plan contact a friend or trusted advisor. Be sure to interview more than one Financial Planner. Look closely at the fees for service. You need to trust this person completely and to be comfortable with them; you will be working closely with them for many years to come."

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