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There’s a lot of emotion involved in personal finance. In fact, how you budget reflects your priorities. For instance, if you are married, one of your goals may be to save 5 percent of your monthly paycheck for a family vacation at the end of the year. Meanwhile, your spouse would rather save less for a vacation, instead using that money for donations to charities he or she considers worthwhile. Neither goal is right or wrong. The goals simply reflect different priorities.
Insurance, too, ties into the emotional side of personal finance. An obvious example is the life insurance you take out and that aims to keep your family afloat and financially stable should you die. In fact, it is useful to think of the many types of insurance as a preventative measure to stave off conflicts later in life. Read on for more.
Money Woes Are a Huge Stressor
What causes headaches for many Americans? Money, of course! The expected expenses such as monthly loan payments can be bad enough, but unexpected expenses happen a heck of a lot. For instance, say that you drive to work every day but don’t have good car insurance—or auto insurance at all. What happens if you are involved in a car accident, and your car gets totaled? Talk about a huge stressor. It’s one that insurance could have prevented, and now a personal finance decision could be negatively affecting your life or relationship.
Insurance Can Prevent Conflicts
Few people enjoy conflicts and stress, and having adequate insurance in place can ensure that many problems never happen. By paying more now for insurance coverage, you are likely saving money down the road.
Direct savings can come in the form of not needing to fork over a lot of your own money to replace a car, but savings can also come in indirect ways such as not needing to pay for a divorce later. Since money problems are a leading cause of divorce, this example is quite realistic.
Then there are the potential consequences of strained family relations. For instance, children who lose respect for you. A spouse who stays out with friends later and later. A spouse who turns to gambling in order to pay for an expensive repair. Any financial conflict has the potential for a tremendous number of direct and indirect repercussions.
Think Back to Your Life
Think of a particularly huge expense you’ve had in your life. Maybe it was when your car broke down, and you needed to pay for it to be towed 30 miles and then had to pay a few thousand dollars for the repair. What were the domino effects? An emergency fund could have ensured that you had adequate resources to pay that bill. Similarly, by increasing your insurance coverage now, you could be paving the way to a smoother life.
The bottom line is that personal finance is not a black-and-white, emotionless topic. There’s plenty of emotion, good and bad, involved in it. A little preventative planning can go a long way toward keeping the bad emotions out of your life later on.