How To Protect Your Credit Against Emergencies And The Unexpected
The unexpected always happens when you're least prepared for it. That's why you may be surprised when an unexpected event does occur. Things like car accidents, doctor's bills, natural disasters, or even air conditioner repairs all occur seemingly out of nowhere. So, how do you protect yourself from these unexpected events without going into financial ruin? Here are a few unexpected life events and how you can protect your finances in an emergency.
Expenses That You Might Charge To Your Credit Card
Living in Florida, numerous unexpected emergencies can lead to individuals using their credit cards to cover expenses. One of the most prevalent emergencies is air conditioning repair or replacements. The temperatures in Florida can rise into the 100's and air conditioners are used for at least ten months out of the year. Increased usage puts a strain on the a/c and can cause you to replace the entire system or overhaul it faster than expected. In my case, it was less than eight years in a new home before we needed a new system.
Other emergencies that occur in Florida are hurricanes. Hurricanes can leave you scrambling to find canned food, gas for your generator, and even candles. Hurricanes can also have you doublechecking your homeowners' insurance policy to ensure you have credible coverage. If you don't have money saved up in these situations or credible coverage, you could end up paying out of pocket or using your credit card to cover any costs.
Budget Busters And How To Reduce Them
Strategies To Protect Your Credit Score From Emergencies
To protect your credit score during emergencies, you can build an emergency fund that can cover medical, household, job loss, and other unexpected events that may occur. Also, double-check your insurance policy to see if you have enough coverage in the case of an emergency. Do you have a flood policy? Have you done any renovations lately? If so, did you notify the insurance company of your home upgrades? If not, your policy may not have the appropriate coverage levels to rebuild your home with the upgrades included.
In the case of a job loss, COVID has taught us that the unemployment system cannot always be a backup source of income. Creating an emergency fund that can cover three to six months of your monthly expenses can help bridge the gap until you find suitable employment. In addition, building an emergency fund reduces the need to use your credit card during emergencies and eliminates the need to borrow money at exorbitant interest rates. Ultimately, having additional funds saved up can help keep your budget on track and allow you to continue planning for your future goals.
See my feature in 8 Things To Do After Being Laid Off.
Programs That Help People With Credit Emergencies
The Public Benefit Corporation curates resources through Findhelp.org that provide community members with assistance during emergencies. If you are looking for help with food, housing, transportation, work, and any other subset of these categories, aid is available in your local area. Harris Financial Coaching is a participating member of findhelp.org, and there are many more in your local area. Fema.gov is another resource that provides funeral assistance if a family member has passed away due to COVID-19.
The Homeowner Assistance Fund was also established by the American Rescue Plan Act and can help you if you were financially impacted by COVID-19. So, if you are having difficulty paying for your mortgage or utilities, you may be eligible to receive financial assistance. Find out more here.
Did You Miss A Credit Card or Other Bill Payment?
If you miss a credit card or bill payment, it's essential to pay it as soon as possible. Not paying the bill can lead to additional fees and late payments being due. Some utility bills, mortgage payments, or credit cards have a grace period before you're charged a late fee or additional interest. Paying as soon as you realize that you miss a payment reduces the chances of it being reported to the credit reporting
Whatever you do, planning for emergencies by building up an emergency fund and ensuring that you have medical, homeowners', and even life insurance can reduce some of the financial turmoil caused by emergencies. The words of Confucius still ring true thousands of years later: "A man who does not plan long ahead will find trouble at his door."