85- Are You Financially Prepared?
Updated: Jan 15
Are you financially prepared? The great financier, Warren Buffett, has been quoted as saying “Only when the tide goes out do you discover who is swimming naked.” With the advent of the coronavirus pandemic, we are seeing the naked financial situation of millions of Americans. This includes those with no sick leave benefit, no health insurance, too much debt, living paycheck to paycheck and having little or no emergency funds. In this post, I want to talk with you about the importance of being financially prepared.
When a situation such as the Covid-19 virus confronts us, it places unexpected financial strains on our budgets. It also exposes the fact, that in the United States, we have less of a guaranteed governmental social safety net than in many countries. You make take some of the following protections you have for granted, but you need to carefully consider which of them that you have in place and which are missing. To the extent you don’t have these benefits as a result of your employment or paid for out of your own money, you really need to consider putting these protections in place.
Here are the major areas that you need to have in place to be prepared financially:
The United States has not offered a national entitlement of paid sick leave for every person, although the recent legislation put forth by Congress to fight the financial impacts of the Covid-19 pandemic creates a specific one for this specific situation. Most all sick leave benefits that people have today are work related. These benefits are usually granted to full-time employed people. This can be either in the form of a specific number of sick days or through paid-time-off or PTO programs. Those people working in the Gig economy or part-time may not have any such benefit. Having sick leave is a foundational benefit. Do not take it for granted if you have it, and if you do not, finding a job that offers this benefit or saving additional money in your emergency fund to cover illness is essential.
The United States does not offer a national entitlement of paid health insurance for every person. The Affordable Care Act extended coverage to many more people, but we have millions of people without coverage. As with sick leave, most people get health coverage through work or obtain coverage from the Affordable Care Act or other state based health programs. Having health insurance in place is another foundational benefit. Many people do not have coverage because they view having the benefit as an unaffordable luxury. I cannot tell you how important it is to have coverage in place for yourself and your family. I grew up with a brother with a major health condition that was uncovered for a long time. The financial strain on our family to pay for his medical bills was a constant worry. I will write more about health insurance in future posts.
Life and Disability Insurance
Unlike sick leave and health insurance, the decision to have life and disability insurance is mostly voluntary. Depending upon the type of policy you purchase, these policies, with certain exceptions, protect you against the risks of premature death, a condition that no longer allows you to work at your current job, critical illnesses and the risks of living too long. Sometimes these benefits are offered through the workplace and sometimes they are not. In situations where no employment related coverage is provided, individuals must secure their own coverage. I have written in several posts about the need to have some amount of life insurance and disability coverage in place. These policies deliver cash to you at a time when you need it most – to provide cash to you or your loved ones. Most Americans have not made purchasing these policies a priority. Covid-19 should make you rethink your need for coverage if you have none.
Your Emergency Fund
Situations such as those brought on by the Covid-19 pandemic bring home the need for you to have an emergency fund that your regularly fund. For many families, having to purchase an additional two weeks of food or medicine because of the pandemic have placed significant financial strain on their budgets. If some people are forced out of work because of the situation and lose their paychecks, this will add significant stress. If you have an emergency fund that is fully funded, that is great. If you have not put one in place until this situation, you now see why you need one. You need to change your financial habits to create an emergency fund, please do so.
Financial preparedness is not a sexy topic. It does not trend highly in social media. But it will bring you and your loved ones piece of mind and financial security during uncertain times. You need to look after sick leave, health insurance, life insurance, disability coverage and having an emergency fund in place. Putting these financial protections in place provides the financial protection foundation you need to live in the FinancialVerse.
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