How to create a financial emergency plan
A financial emergency plan can help you prepare for unexpected expenses or a change in income. Start by reviewing your finances, building emergency savings, identifying potential emergencies and writing down the resources and steps you could use if your circumstances change.
Because each household is different, your financial emergency plan can reflect your income, expenses, family responsibilities and available resources.
How to make a financial emergency plan
Consider these six steps to help you organize your finances and prepare for unexpected changes.
1. Review your income and expenses
Start with a clear picture of the money coming in and going out each month. List your sources of income, recurring bills, debt payments and other regular expenses.
A budget can make it easier to identify essential expenses and areas where you may have flexibility.
2. Review your emergency savings
An emergency fund is money set aside for unexpected expenses or changes in income. Financial professionals generally recommend a goal of about three to six months of living expenses, though the amount that makes sense for you can vary.
Use the emergency fund calculator to estimate a savings target based on your expenses.
If that target feels far away, consider starting with an amount that works within your current budget and building from there.
3. Identify potential financial emergencies and resources
Use this guide to help you think through a few financial emergencies that could affect your household and the resources you might need in each situation.
Your circumstances may be different, so think about emergencies that are most relevant to your household. As you review them, note where to find important information such as insurance policies, savings, workplace benefits, retirement accounts and financial or estate documents.
4. Identify people and organizations you may contact
Depending on the situation, your list might include:
- Your insurance agent
- Your employer or human resources department
- An accountant
- An attorney
- A financial professional
- Government agencies or community organizations
Keeping important names and contact information in one place can make your plan easier to use when you need it.
5. Write down your financial emergency plan
Putting your plan in writing can turn general ideas into clear next steps.
For each type of emergency you’re preparing for, consider recording:
- What expenses would need attention first
- Which expenses could be reduced or temporarily paused
- What savings or other resources may be available
- Who you would contact
- What benefits or assistance programs you could research
- Where important financial and insurance documents are stored
Store the plan somewhere secure and accessible. If appropriate, let a spouse, partner or family member know where to find it.
6. Review and update your financial emergency plan
Your finances and responsibilities can change over time. Consider reviewing your plan after major life events such as moving, changing jobs, getting married, having a child or experiencing a significant change in income.
An occasional review can also help you update contact information, savings goals, insurance information and important documents.
Financial steps to consider during an emergency
The actions that make sense depend on your circumstances. Your written plan might include options such as:
- Adjust your budget: Create a temporary budget based on your current income.
- Prioritize essentials: Focus on housing, food, utilities and other essential expenses.
- Review expenses: Look for bills and recurring expenses you may be able to reduce.
- Explore payment options: Contact creditors or service providers to ask about available payment options.
- Research available benefits: Look into government or employer benefits for which you may qualify.
- Use emergency savings: Consider using emergency savings for unexpected expenses.
- Talk with a professional: Contact appropriate financial, tax or legal professionals when needed.
Before making a major financial decision, consider the potential costs, tax implications and long-term effects.
Preparing now doesn’t mean expecting something to go wrong. It means giving yourself a clearer starting point if your financial circumstances change.
To continue preparing, learn more about types of savings accounts or contact a local State Farm agent to discuss options that may help you plan ahead.
This content was developed with the help of AI and reviewed by State Farm editors.
The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
Neither State Farm nor its agents provide tax or legal advice.
