Emergencies happen to your clients when they least expect them—a broken down car, an unexpected medical bill or a job loss. And when they occur, they can quickly spiral into a financial crisis.
As a trusted advisor, that's why it is so important to work with them so that they have an emergency fund to fall back on. By teaching your clients to set aside a few dollars each month, they can build up a cushion of cash that can help them weather any storm.
But it is frustrating when you are in the middle of building an emergency fund and Murphy keeps knocking at your door. You will never be able to make any progress on your emergency fund if you don’t first put methods into place to protect yourself.
With a little bit of planning and discipline, your clients can easily build up their emergency fund and protect themselves from financial hardship.
Here are a few tips to help them get started:
1. Invest in an extended car warranty
If you are like most people, the thought of unexpected car repairs is enough to make your blood run cold. And if you do not have an emergency fund to cover the cost of those repairs, it can be downright scary. But there's no need to panic because even if your client has a used car, they can still get an extended warranty for cars over 100,000 miles.
Investing in an extended car warranty can help protect from those unexpected expenses. An extended car warranty is like an insurance policy for a vehicle. It covers the cost of repairs if something goes wrong with the car.
And best of all, it can give your client peace of mind knowing that they are protected in case of an unexpected breakdown. So if you want to teach your client, avoid the financial stress of unexpected car repairs, investing in an extended warranty is a great option.
2. Create a budget
Making and sticking to a budget may not sound like the most thrilling way to spend your time, but it can be a lifesaver when it comes to protecting yourself from unexpected expenses.
A budget can help your client keep track of their income and expenses so that they can see where their money is going and make adjustments as needed. It also can help to set aside money each month to build up an emergency fund, which can give a cushion to fall back on in case of an unexpected expense.
And if your client sticks to your budget, they may even find themselves with some extra money each month to save or use for fun. In order to keep from getting discouraged, a budget can be a helpful tool for protecting yourself from unexpected expenses and keeping finances on track.
3. Invest in insurance
No one likes to think about the possibility of an accident or illness, but the truth is that these things can happen to anyone at any time. If your client is not prepared financially, an unexpected medical bill or car repair can quickly derail their efforts to save for a rainy day.
That’s why it is important to invest in insurance. Whether it is health insurance, auto insurance or renter’s insurance, having a policy in place will give your client peace of mind knowing that they are protected in case of an emergency. Plus, you never know when they might need to use their insurance benefits—but when they do, they will be glad they have them.
4. Avoid using credit cards
If you want to teach your client to protect themselves from unexpected expenses while they’re building up their emergency fund, one of the worst things they can do is to use credit cards unwisely. Not only will this dig them into debt, but it’s also a surefire way to rack up interest charges and late fees.
Furthermore, if they miss a payment or two, their credit score will take a hit, making it more difficult (and more expensive) to borrow money in the future. Using credit cards is a recipe for financial disaster if your client isn't properly armed with the proper way to use them.
5. Live below your means
Living below your means doesn't have to be some dreary, austere lifestyle. It can actually be quite exciting (and fun)! Just think of all the unexpected expenses you can avoid by living below your means: that flat tire on your car, that doctor's bill for that weird rash, the cost of your son’s little league baseball gear.
Not only will your client be prepared for those little emergencies, but they’ll also have some extra cash on hand for when the really big ones come along. So go ahead and advise them to live a little below their means—it just might save them a lot of headaches (and money) in the long run.
Saving for an emergency fund doesn't have to be difficult or overwhelming—a little bit of planning and discipline can go a long way. These tips will help your clients get started on the path to financial security so that they can rest easy knowing they are prepared for whatever life throws their way.
Jennifer Chonillo is the Digital PR Manager for AutoMoBlog and The Detroit Bureau.
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