Plan for the worst

We twenty-somethings are relatively new to what is often referred to as the “real world.” We’re new to bills, the 40 plus hour work week, and the responsibility of handling difficult situations without help from grown-ups… because now we are the grown-ups. As Denis Waitley said, you should always “expect the best, plan for the worst, and prepare to be surprised.”

There’s no need to build your own private bomb shelter stacked to the ceiling with canned beans (unless you truly believe the end of days is nigh like these MTV True Lifers). Pessimists might already be great at planning for worst case scenarios, but even fly-by-the-seat-of-your-pants types need to get some plan in place for when the unexpected happens.

The phrase “worst case scenario” usually conjures up an image of a Final Destination-esque freak accident. While these situations are unlikely to happen in real life, it’s not a bad idea to properly plan for unexpected situations. Examples include keeping a flashlight near your bed in case of an overnight power outage or weather emergency (not to be confused with the infamous Fleshlight), or keeping a blanket, food, and extra warm clothing in your car during the winter in case you get stranded on a deserted road. It’s also good to have a small first aid kit in your vehicle, your purse, and at home. If you want more information about how to prepare for emergency situations, check out this government website that covers many different types of situations. Thinking ahead might simply add convenience to your life, or it could save your life.

In a more general sense, the no-brainer way to plan for almost anything is to save your hard-earned pennies. The ultimate goal should be to have about six months of expenses liquid (i.e., in your savings account and not tied up in investments or other assets).  Should disaster strike, like the loss of your job, home, or car, you can just take the hit to your savings and replenish it as soon as you can.

1. Establishing an emergency savings fund is especially important if your credit score isn’t great (for example, below 600). Since you may not be able to get approval for credit when you are in dire need of an auto loan or personal loan, your savings account will serve as your safety net until you can improve your credit score.  Even for those with stellar credit, though, it’s best to use your savings rather than a loan to get out of a bind.  That way, you aren’t paying interest or potentially damaging your credit score because of an emergency.

2. Building that savings up from nothing is quite a feat, though, especially if you are living paycheck to paycheck like many other twenty-somethings. Starting off small, like saving about five to ten percent of your paycheck each month, will make slow but sure progress. Another option is to cut down on unnecessary costs (true story: my husband and I cut out Hulu, Netflix, and Spotify to save almost an extra $30 every month, just until our savings is at a comfortable level. Desperate times call for desperate measures!) If you have already cut your budget down to the bare bones, consider taking on an extra part time job or even selling some of your belongings. Again, it can just be temporary until you have a nice safety net.

3. Your emergency savings fund does not only apply to money, though. If your employer offers paid time off, make sure you save a buffer of a few weeks each year. This will serve as a cushion in case you need to  take time off from work, but cannot afford to take it unpaid.  For instance, you may need to fly across the country to be with a sick relative or recover from an injury.  It’s no problem to use some of your sick time or vacation time, but it’s a good idea to keep as much of it as you possibly can.  Having this buffer is much more important than taking a gratuitous number of so-called “mental health days” at the beach, no matter how tempting it may be.

Another important way to plan ahead: get insured! Paying those expensive monthly insurance premiums may seem unnecessary when everything is going well for you, but you are only an illness, car accident, or flood away from needing to file a claim. There are many types of insurance that you ought to have if you want to be covered for all of life’s potential sticky situations.

1. Life insurance is important especially if you have dependents who you support with your income. If something happens to you, paying the monthly bills will something your dependents don’t need to worry about. In general, it is suggested that your life insurance policy cover about six to ten times your yearly income.

2. Similarly, health insurance is another important way to make sure your bases are covered. Not only can you take advantage of preventative care so you are less likely to have an emergency health situation, you will be covered in the event that an emergency does happen.

3. An often overlooked form of insurance is homeowner’s or rental insurance. Not only must you have the insurance policy, but you also need to have receipts and photos of your possessions to receive your full payout in the event of a disaster or theft. Many people overlook this aspect of coverage, but it’s no joke.

4. Understanding your insurance policies is a major part of being prepared. If you don’t know what your policy covers, you won’t know when it makes sense to file a claim. This Investopedia article is a great resource if you need help decoding your current policies.

Some events, no matter how much you plan, will still be a major blow. The loss of a job, the diagnosis of a serious disease, or the loss of a home would be a major negative shock in anyone’s life, but proper planning ahead will make the difficult news easier to bear.

Having a general idea of what to do in these situations will make getting through them a lot smoother. Emergency preparedness is a way of hoping for the best in even the worst of situations. With the appropriate plans in place, even the worst situations won’t stop you in your tracks since you’ll already have a plan in place.

How do you plan for the worst?