Your airline is prepared
I was recently on a flight from New York to Las Vegas. About 30 minutes into the flight, the gentleman behind me became physically distressed. The flight attendant immediately rushed into action, within minutes, he had called a doctor, assessed that the man did not speak English as a first language so he found a French translator, and provided the doctor with oxygen and a medical kit. The situation was communicated to the pilots and doctors on the ground were consulted. The man was initially stabilized; however, he passed out again and was carried to the back of the plane for further assessment. Within 20 minutes of the initial signs of distress, our plane had landed in Detroit, the paramedics were waiting, and a new plan was put in place for our plane. Apparently we needed to refuel and have a maintenance check while grounded because the plane landed with 10,000 pounds more weight (due to fuel) than it was supposed to have. Within the hour, we were back up in the air, and in awe of the airline crew and staff. This was clearly not what the crew thought would happen on this flight; however, it was clear that they had plans and procedures on what they should do should something like this occur.
Four Steps to Prepare for a Financial Emergency
Do you have your own emergency plan or procedure should something happen to you financially? Just like I witnessed on this flight, and I recently experienced with the loss of my friend, life is unexpected, and the best way to deal with the unexpected is to plan for it.
- Emergency Funds – In my mind, these funds are the most important for a client to have, and yet most of my clients when we first meet have very anemic emergency fund account. In fact, roughly 75% of people do not have a healthy savings account. A good rule of thumb is that you should have six months to a year of your monthly expenses saved in your emergency funds in cash. So if your monthly expenses are $2,000, you should have at least $12,000 in your bank account in cash for emergencies. Do you have this? When you are saving, this should be the first fund you build. I have clients ask how much they should put in 401ks or retirement accounts or pay off student loans, and if their emergency funds are not high enough, I won’t let them invest in or pay down the other options. I have seen too many people get into financial distress like credit card debt, etc. because their emergency funds were not robust enough. If you have a tough time savings, then you need to find a savings strategy for you to help you get there. A few of my blogger friends have written great posts on savings strategies. I also recently wrote a book that gives specific advice and exercises on getting to the savings goals you need to achieve.
- Life Insurance – Tomorrow I am going to write more on life insurance, but after emergency savings, I feel it is one of the keys to handling a financial emergency. For most of us, our own mortality is not something that we are comfortable contemplating; however, we have no guarantees in life, and I would rather have my clients experience the temporary discomfort of thinking about death than live through years of financial pains should a surprise life event transpire.
- Strong Credit – Last week I wrote about credit and the importance of a strong credit profile. In a life emergency, we never know exactly what we will have to do. I am sure that the pilot of my flight did not know immediately that he was going to have to land in Detroit. However, after careful analysis, it was determined that Detroit was the ideal landing location. If you experience a financial emergency, you may have to move or you may have to change jobs or you may temporarily deplete your emergency funds. Strong credit and access to credit can help you buy time and save costs during times of change.
- A Will / Living Will / Power of Attorney – This topic goes along the lines of life insurance and is actually the most “painful” one for my clients to contemplate. Again, creating a will or other legal document that will carry out our wishes should we be unable is not something that is pleasant to think about; however, when you are healthy and active is the best time for you to put thought to this. If you have a child, a will is an absolute must in my mind. It does not have to be something expensive to create either. There are a number of online resources such as Legal Zoom and Total Legal that allow you to prepare a will, easily for around $100. A living will and power of attorney can both be created online as well. These documents will help loved ones care for you while you are still here. And also note that once you create these documents, you should plan to review them at least every year or so in case your situation has changed. I had clients to created a will after their first child was born, but never revisited it and had since had two other children. Wills, living wills and powers of attorney take the stress out of an already stressful situation.
We are all thankful that airlines have emergency plans and procedures should the “unexpected” happen on a flight, so we should do the same for ourselves should an unexpected life event transpire. The four steps that I outlined represent a great start to making sure that you are prepared for an emergency landing.
Do you feel prepared for an unexpected life event? How have you prepared? If not, what do you need to work on?