Preparing and experiencing a disaster. How we can prepare ourselves for a financial crisis?

I've not been posting in my blog for the past few days. I'm actually in Taiwan currently. If you've watched the news, Taiwan is preparing for a typhoon that is forecasted to come in today. The name of the typhoon is typhoon trami. I'm preparing for this disaster and experiencing it for the first time. I'll share with you on how we can prepare for a financial crisis too in this post. So read on to find out more.

As a Singaporean, we do not have any disasters in our home country. In a sense, we're really fortunate to live in a safe environment. Let me share with you how Taiwan is preparing for this typhoon.

The news channel here is reporting on the typhoon and keeping residents updated on the crisis. Many shops are pilling up sand bags. Fishermen are securing their boats to prevent their boats from being blown away by the typhoon. Currently, many states in Taiwan has declared the sea and land typhoon alert. Schools and offices are closed and declared typhoon holiday. Domestic and some international flights are canceled.

I'm at central Taiwan now. The strength of the typhoon is strongest at the north of taiwan at taipei. From where I am currently, it has been raining very heavily since morning and winds are very strong.

The bad thing for me is i'll be stuck in my hotel for the whole day today. Hopefully tomorrow when the typhoon passes, I can continue travelling.

Preparation for any crisis is very important. It is the same with our finances. During a financial crisis, we may lose our jobs, our investment portfolio will suffer loses and those with high debts will be affected the most.

How do we prepare ourselves for a financial crisis?

1) Set aside at least 6-9months of your monthly expenses as emergency fund

Having an emergency fund will prepare you in case you lose your job during a crisis. It helps you to have a piece of mind to continue living your life and provide for your family while you find another job.

2) Do not be overleveraged on debt

How much debt is a healthy level? Many financial advisors will recommend you borrow not more than 60% of your monthly income. This includes your housing loan. Debts require you to pay interest also. Generally, debts with high interest rates will increase the impact caused to you.

3) Have a compresensive insurance and hospitalisation plan

Having insurance will ensure your family have a sum of money in case something happens to you and hospitalisation plans will cover you for your medical bills. We should have ourselves covered by insurance and hospitalisation plans regardless of a financial crisis or not. Seek a professional financial advisor on what you need. A point to note is do not buy too many insurance plans. Some are not really needed. So do research throughly before buying one.

4) Do not invest money you cannot afford to lose

During a crisis, stock market will crash and most of your investments will be negatively impacted. If you invest money you cannot afford to lose, you'll be emotionally unstable during a crisis and will not be able to make sound decisions. That is what happen to many people who over invest. They got their fingers burnt because they were forced to sell their investment during a crisis. Those who have capital to invest more during a crisis will emerge out better off. Learn how to invest wisely before you even start investing.

5) Upgrade your skills and seek to have more than one source of income

Upgrading our skills or learning more skills will enhance our competitiveness. In case we lose our jobs, we can find another one more easily if we have more skills. Investing in yourself and getting more certifications will definitely help you. Having more than one source of income is definitely even better. We can learn to create passive income. Other sources of income can come from rental from properties, dividends from stocks, part time business, royalties from intellectual properties like books and music albums etc. Learning to create multiple sources of income can increase our income greatly and let us reach financial freedom faster also. During a crisis when you lose your job, you do not have to worry too much too.

These are some of the points that can help us in preparing for a financial crisis. I can write so much today because I'm really stuck at the hotel as the winds and rain gets heavier and heavier. I can see the trees swaying agressively and the winds howling strongly even though the windows are tightly closed. I'm experiencing a nationwide crisis.

Start preparing today. Preparation starts before a crisis happens.

I'll end of with a famous quote:  "If you fail to plan, you plan to fail."

Related posts:
1) Why people lose their money during crisis?
2) How to pick stocks (Part 1) - Economic Moats
3) Rising household debts in Singapore worrying