Sometimes, even the best laid plans go awry. Here’s a list of potential debt traps you may fall victim to and what you can do to prepare for them.
We all know debt is something we need to avoid as much as we possibly can. After all, there are few things more worrying than being saddled with a mountain of debt that you just can’t seem to shake off. Apart from the massive strain debt can place on your financial situation, it can also cause mental stress and if left to fester, can adversely affect other parts of your life.
While many of us try our best to keep any form of debt at bay, sometimes situations arise where taking on some form of debt or the other is practically unavoidable. Even though you may have saved a substantial amount over the years, carefully planning and budgeting your money, certain unfortunate instances can occur that could not only wipe out whatever you’ve put together over time, but also force you to take on credit in the form of loans or even max out your Credit Cards.
Of course, depending on the severity of the circumstances, you could either claw your way out of your financial hole eventually, but just in case you’re wondering what situations could lead to a complete decimation of your finances, we’ve put together a list of potentially crippling debt traps and what you could to do prepare for them.
Additional Reading: Should You Repay Your Debts With A Personal Loan
Sudden Death Of A Family Member
A death in the family can be a tumultuous event, especially if it happens out of the blue. An unexpected and unforeseen situation such as this can plunge entire families into severe mental and financial trauma and can certainly be difficult to recover from, especially if the person who passed away is the sole breadwinner in the family.
While there is no real way to mentally prepare for something as terrible as the death of a family member, you could soften the blow from a financial perspective by taking out a Life Insurance policy that will ensure that the financial requirements of the remaining members of the family are taken care of in the aftermath of such a tragic event.
Apart from the tax benefits one can glean by taking out a Life Insurance policy, Life Insurance providers also offer riders which cover against hospitalisation costs and critical illnesses. This way you can financially cover all your bases.
Additional Reading: How To Choose The Right Life Insurance Policy
A divorce need not be a messy affair but sometimes they certainly can be, especially from a financial point of view. Divorce proceedings can be expensive with all the legal work involved and if one party ends up with the majority of the funds and assets, then it could put the other party in a pretty tough financial situation, especially if he or she is already struggling with debt.
This is why it is advisable that couples not only invest and save together, but individually as well. This will ensure that both partners take charge of their own finances and will have something to fall back on individually in case they end up parting ways.
Additional Reading: How To Manage Your Finances After A Divorce
Road accidents can occur without warning and if you are unfortunate enough to be caught in a serious one, it could be bad news for not just you, but the third party as well. Not only will you have to worry about vehicular damage, but also the massive hospitalisation costs if your injuries are extremely serious.
This is why taking out a comprehensive Car Insurance policy can certainly come in handy to protect you from the financial fallout that can take place in the wake of an accident. Although it is mandatory in India to get Car Insurance if you own a car, a good Car Insurance policy can cover you against damages to your car, hospitalisation expenses and even compensate your family financially in the unfortunate event of your demise.
Additional Reading: Car Insurance FAQs
While certain situations like the ones mentioned above can certainly bring their share of financial troubles, preparing for them is the best thing one can do to ensure that the spectre of debt is kept at bay as much as possible.