A financial setback can happen to anyone, at any time. However, once you are retired you could be increasingly prone to these problems because you might be living on a very fixed income. What would you do if you encountered a major unexpected expense? Would you be able to cover it without affecting your long-term retirement income plan?

Let’s take a look at a recent report by the Federal Reserve, which polled households across the country. According to the report, 18 percent of households experienced a financial crisis in 2015, for the following reasons:

• Health emergencies (36 percent)
• Lost jobs (25 percent)
• Loss of spouse’s job (13 percent)
• Reduction of work hours or pay (18 percent)
• Reduction of spouse’s work hours or pay (12 percent)

It’s unlikely that any of these reasons surprise you; they’re pretty standard causes of financial problems. However, the fact that health emergencies are the most common cause of money woes should be of particular interest to retirees. And of course, if your spouse is still working or if you’re depending upon income from a part-time job, any of the other factors could impact you as well.

Not only can any of the above events strike at any time; the study uncovered something else that might be an even bigger problem. When asked how they would cope with an unexpected expense of just 400 dollars, only half of study participants felt they could handle it. A whopping 47 percent said they would be forced to sell personal items or ask for a loan. And of course, we’re only talking about 400 dollars here. The typical health crisis could cost ten or twenty times that much – perhaps even more!

As with most things in life, prevention is the best “medicine” for a financial crisis. Start preparing now, and you can better handle anything that comes your way. If you haven’t already taken these four steps in preparation for retirement, get started on them now.

• Take steps to get out of debt.
• Analyze your spending and reduce unnecessary expenses, to free up more cash in your budget.
• After you reduce your budget and free up some money, start putting that cash into an emergency fund.
• Make sure your health insurance needs are met so an unexpected illness or accident will not cause financial hardship.

If you’re concerned about your preparedness for a financial emergency, give us a call. We can help you to prepare for many of the unexpected life events and help you to avoid the financial distress that can come from them.