Unexpected events—and their costs—are a part of life. Here’s how to minimize the financial fallout.
Prepare your finances for these 4 unexpected life changes
Even the most carefully laid-out plans can be thrown off course by unexpected events. While you can't plan for everything, there are steps you can take to help prepare your finances for four common situations.
Handling an illness or injury
Nobody wants to think about a medical emergency, but planning for the possibility could protect your finances down the line.
Steps to take now
- Review your health insurance plan. Check your health insurance coverage, whether you have it through your employer, a family member, on your own or through COBRA if you’re in between jobs. Also, learn about different available health plans, what’s covered and the benefits of opening a Health Savings Account (HSA).
- If you aren’t covered by disability insurance, consider taking out your own policy—especially if your income would be disrupted in the event of an injury.
- Consider establishing a financial power of attorney.
- Build up your emergency savings to cover any unexpected medical bills.
Steps to take after
- Review applicable employer benefits that may help during this time. Understand leave policies, including the federal Family and Medical Leave Act, and other benefits, such as counseling resources or longer-term remote work arrangements.
- Understand the costs you are facing for care and create a debt repayment plan to cover any outstanding bills. This may involve negotiating with creditors up front to establish a payment plan that feels manageable.
- If you don’t have savings to fall back on, consider the pros and cons of different emergency cash or credit options that can help.
Caring for a family member
When you look after a loved one, there are lots of financial decisions to consider, such as living arrangements, the costs of long-term care and helping with day-to-day money management.
Steps to take now
- Talk to your parents or relatives early. It’s a difficult conversation to start, but having open communication will help all parties down the road. Include siblings or other family members as appropriate to help keep everyone on the same page.
- Gather documents. Make a list of your loved one’s contacts, account numbers and the places they store legal documents, such as birth certificates, insurance policies, deeds and wills. Double-check that everything is still valid and up to date.
- Do the math. Research and plan for the costs of caregiving, including financial assistance options, long-term care insurance and tax benefits for dependent care.
- Consider the benefits of establishing a power of attorney.
Steps to take after
- Even if you’ve started the conversation with your parents early, knowing when to step in still can be tricky and requires a sensitive approach. Watch for cues, like unusual purchases, piles of unopened mail or memory problems so that you can consider making changes.
- Simplify bills and take over financial tasks.
- Make arrangements for caregiving and confirm all costs and fees.
- Prioritize your own long-term financial health. Scaling back at work or dipping into your own savings to help cover caregiving costs can seem like a convenient fix, but be sure to consider your own financial future as you weigh your options.
Losing a loved one
The death of a spouse or a family member can be an overwhelming time for anyone. Developing a plan to handle a loss of life ahead of time can help ease some of the burden in a time of grief.
Steps to take now
- Have a will. Create one for yourself and make sure your spouse or other loved ones do the same.
- Store important documents—wills, life insurance policies, birth certificates, Social Security cards, financial account details, property deeds, etc.—in a safe place. Then make sure your family knows how to access them.
- Identify the key players on your “financial team” and discuss your plans with them. They may include accountants, tax specialists, estate executors, attorneys and financial advisors.
- Consider funeral costs and any other expenses associated with managing the estate.
Steps to take after
- Notify your financial team. Insurance companies, banks and other financial institutions, credit agencies and the Social Security Administration should also be contacted.
- Make account updates. Begin transferring account ownership for all assets, including bank accounts, property, securities, etc.
- Reassess your monthly budget, accounting for changes in expenses and income.
- Update your own will and life insurance policies.
Dealing with divorce
A divorce can be an emotional time for families and disrupt your finances. However, with proper planning and communication, you can make the process a bit easier.
Steps to take now
- Understand your finances. Take stock of all your combined assets and debts. The list should detail things like bank accounts, income sources, investments, retirement plans, real estate, mortgages, loans and other joint debts.
- Start the financial conversation. Discuss what needs to be divided as well as how bills will be managed during divorce proceedings.
- Reach out for assistance. Engage professionals who regularly handle divorces—attorneys, accountants and financial advisors. Consider the cost of legal and accounting services and how to manage those payments.
Steps to take after
- Keep records of assets and monitor accounts during divorce proceedings.
- Make sure you have your own accounts established.
- Update your will, life insurance policies and any other estate-planning documents.
- Update your health insurance if you were covered by your spouse’s employer plan or vice versa.
- Create a new budget, factoring in any child support or alimony payments.
- Get a copy of your credit report from one of the three major credit agencies. Make sure it reflects your changed marital status so that your ex’s money moves no longer factor into your score.
Up Next
More from Bank of America
Contact Us
-
We're here to help. Reach out by visiting our
Contact page or schedule an appointment today. - Schedule an appointment
