Prepare for the unexpected with this 5-step financial strategy.

Preparing for the unexpected can be overwhelming, but emergency preparedness, like having a bare bones budget, can alleviate stress in an emergency.

Couple reviewing paperwork in their home.

Preparing for the unexpected.

Creating a financial strategy may seem like an overwhelming undertaking, but if you take the time now to prepare yourself, you will be able to enjoy more of what you love to do in the future. As you start to transition into your next career phase or retirement, you will probably want to minimize your financial risks.

But even when you do your best to save responsibly and get your fiscal ducks in a row, life can throw curve balls. The good news is that a sound financial strategy can help you deal. Here's a checklist:

1. Start with a financial emergency fund.

  • Worried about what might happen if you lose your job or your spouse has a health crisis? Look at your emergency savings and make sure you have enough cash saved to cover about eight months' worth of living expenses.
  • To build this fund, consider setting up a monthly automatic transfer from your checking to a liquid savings account. Start with a small amount, like $50 per month, and build your fund over time.
  • You can always increase that number if you feel comfortable putting away more.

2. Create a bare bones budget.

  • If you had to pare back to essentials only, what would make the cut? Developing a bare-bones budget requires you to align your "necessary" expenses with your values.
  • For most people, expenses like rent or mortgage payments, utility bills, credit cards, paying off debt, and insurance premiums are mandatory. 
  • Discretionary expenses that might need to be cut or pared back include dining out, shopping for new clothes, and buying the latest tech gadgets.
A man talking on his cell phone looking at something on his laptop computer.

3. Make sure you’re covered.

  • You will want to review your financial situation such insurance coverage and determine whether it aligns with your long-term needs and obligations, especially if you have an emergency. 
  • Life insurance can be more than just a way to protect your family. It can also be a way to grow and protect your long-term wealth. Whole life can be a versatile tool to help meet several needs. The death benefit provides cash to your beneficiaries when you pass away, plus you get potentially tax-free access to your cash value while you’re alive.
  • Your home is likely one of the most valuable assets you have.  While a standard homeowners policy helps protect your house, it typically helps cover more than just the physical structure of your home. From your personal belongings to the shed in your backyard, or even medical bills if a guest is injured on your property.

4. Consider estate planning.

Your financial plan should include an estate plan, which can help lessen taxes, shield your beneficiaries, and avoid the cost and hassle of probate. Everyone needs legal documents that communicate their wants and needs when they no longer can.3

5. Document your important accounts.

One of the easiest ways to prepare for emergency situations is by compiling a list of your accounts and providing instructions for accessing your financial information. This is especially critical in the digital age.

Creating a financial strategy to help prepare for life events is not as overwhelming as you might think; get started with these five steps to protect your future.

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Want to learn more about financial strategies?

A New York Life financial professional can help determine what’s right for you. 

1 Trent Hamm, “A Guide to Building an Emergency Fund,” The Simple Dollar, March 13, 2020.

2 Jeff Kinney, “Renters Insurance: A U.S. News Guide,” U.S. News & World Report, May 14, 2020.

3 Julie Garber, “5 Reasons You Need an Estate Plan,” The Balance, Sep 18, 2020.