Whether you’re a business owner, entrepreneur, or investor, you’re going to encounter unexpected expenses. When you’re blindsided by big bills, it can leave you feeling stressed and anxious. Of course, it doesn’t have to be that way. While the unexpected will happen, you can be prepared to deal with it, no sweat.
From medical emergencies to sudden repairs, your financial strategy may be the difference between a firm foundation and sinking sand.
Strategy 1: Stay Insured
It’s no fun to be caught in an emergency uninsured. While insurance isn’t necessary for everything, you do want to assess your risk and pay for appropriate coverage. Health, home, car, and life insurance are prime examples. Medical bills, especially in the U.S., can get out of hand quickly! Check with your primary insurance agency to see what else they can offer – you may be able to bundle for a better deal or add on additional coverage – be it umbrella or specific. Know your deductibles and what your policy does and does not cover!
Know if you’re exposed to specific risks and act accordingly. You may have liabilities related to your business or you might live or invest in an area known to flood. Don’t dwell on the worst-case scenarios but be prepared to handle them!
Strategy 2: Budget for It
An effective budget accounts for every penny. When you form a personal or business budget, take a conservative approach. Don’t base your budget on your maximum earning potential (entrepreneurs especially may encounter inconsistency), but on a minimum baseline. Outline necessary expenses and leave enough room in your budget to devote to savings, emergency funds, etc. Then, should something happen, you have room in your budget to tackle a variety of contingencies.
Strategy 3: Make the Sacrifices
Surprise expenses create the need to pivot. Depending on how big the bill is, you may have to make some temporary adjustments to your budget. It might mean fewer, less expensive Christmas gifts this year. It might mean delaying that vacation or giving up eating out for a few weeks. Be willing to see what can go – if temporarily – to maintain your financial stability and peace of mind. Few things are so vital that they can’t be cut. It’s not fun and it’s not comfortable, but we must recognize the necessity in times of trouble.
Strategy 4: Diversify Your Income
Wealthy people don’t rely on a single stream of income. Even if they have high-paying jobs, they will have fingers in many pies. It might be as simple as an investment portfolio or as bold as a side-business. Regardless, they have multiple streams of income that act as safety nets in case of emergencies. If one income stream falters, others can cushion the blow to your budget. In the same way, this extra income can be channeled into savings or emergency funds to protect you from the unexpected.
Strategy 5: Cut Back Your Portfolio
It might be time to employ some exit strategies. While you want to hold on to good investments, you can also make some extra money by offloading the mediocre entries in your portfolio. Keep yourself open to this possibility when facing a big, unexpected expense. If you’re lucky, you’ll knock out two birds with one stone – saying goodbye to a surprise bill and getting rid of a problem investment all at once.
Strategy 6: Forge Real, Rock-Solid Relationships
Entrepreneurs, value your business relationships. While none of us go into new relationships with the sole purpose of finding someone to bail us out of financial trouble, you can build a network that will step up in your time of need. How?
First things first, be generous yourself. Be quick to offer your help, whatever form it may take. It makes people more willing to help you when there’s a favor to be returned. Form relationships with the professionals you aspire to be – those on your level and well above it. These are the people who may be able to offer valuable insights and financial advice, on top of the potential to provide private loans and funding to keep things afloat.
The company you keep can make or break your finances when push comes to shove.