Most Americans are facing trying financial times right now. Inflation is out of control and the most basic goods are more expensive than ever before. You may be looking to save money in your monthly budget, especially if you have been given a pay cut or lost your job. However, some expenses are non-negotiable.
We’re not talking about the obvious ones, such as rent or mortgage payments. It may be tempting to put the following expenses on the chopping block, but they may be more crucial than you think.
Unless you own a home, you should have renters insurance. If you’re wondering how much renters insurance you need, it should be enough to cover all of your possessions as well as personal liability. This kind of policy costs about fifteen to twenty dollars a month. It covers your possessions for theft and destruction, while covering you for personal liability.
You might be tempted to stop paying renters insurance as you don’t feel like you’re at too much risk. If something gets stolen, you’ll wait until you can afford to replace it. However, this can lead to a very sticky financial situation.
Even if you are not robbed of everything you own, having certain items disappear can be devastating when you’re short of cash. If your laptop is stolen, for example, you will need to replace it immediately. Without insurance, you may struggle to afford a replacement. You may not be able to work until you get one, potentially leading to lost income or high-interest loans you can’t pay.
Personal liability is another big consideration. If you accidentally cause damage to another person or their property, they are not going to wait until you are in a better financial situation to claim damages. They may take you to court, leading to high expenses in addition to the damages you pay.
It shouldn’t need to be said that health insurance is non-negotiable. However, people make bad decisions when finances are tight. You may think that since you are young and healthy, you are unlikely to need health insurance. Even though you understand that accidents can happen, you might come to the conclusion that the risk is fairly low.
But while the risk of an accident occurring may be low, you are putting a lot of money at risk. Health care is extremely expensive. Many people who have gone through a health crisis have ended up in crippling debt or even homeless. If you are diagnosed with a major illness like cancer, health bills will rapidly rise into the hundreds of thousands of dollars.
Whether you work for an employer or for yourself, you should have a retirement annuity. This may be a 401(k) or any other type of fund that you contribute to every month. A significant amount of money goes into it so that you are not left with no income after retirement.
If you’re young, this is a very tempting one to cut. In theory, you could compensate for the contributions you missed when things get better. You may even consider withdrawing what is already in your retirement fund.
However, this is a very dangerous course of action. If you do withdraw some of your funds, you will get charged a high penalty fee. And if you stop making contributions, you could be left penniless sooner rather than later. There are many Americans working well into their seventies and eighties because they did not save enough for retirement.
It is difficult to take care of what you’ll need decades in the future when you’re struggling to pay your bills now. Nonetheless, retirement funds work because they are started long in advance of retirement age, and you should not compromise this.
You may be able to take a loan on your retirement annuity. These are some of the most affordable loans you will find. It does depend on how much you already have in your fund.
Cutting costs is necessary for many people these days. But there are some costs you just shouldn’t cut, no matter how tempting it is.