No Fund Me: Five Things To Do So You Never Need an Emergency Fundraiser
For most, Go Fund Me invokes thoughts related to a tragedy or misfortune for a family member or close friend. We’ve all been a part of, or at least seen, a Go Fund Me created to support someone we know. And make no mistake, the circumstances that lead to someone requiring assistance from a Go Fund Me are typically very sad. Go Fund Me also reinforces the belief that there is hope for humanity. It can show that there are good people willing to financially assist those that need it. Hospital bills, funerals, and income replacement for the sick or injured are among some of the most popular themes. Additionally, Go Fund Me allows individuals to raise funds for school-related expenses, animals, and other interests of their users. Go Fund Me is essentially a third-party platform for raising awareness and collecting funds for anyone trying to raise money. When you have a known name and trusted brand, it’s easy to make a payment directly to a company like Go Fund Me to help someone raise money.
What does Go Fund Me get out of all this? They charge a 5% fee for each donation dollar received and an additional 3% processing fee. So, for every $100 you donate to a cause, Go Fund Me will take $8 of it (or 8%). They are structured as a 501(c)(3) non-profit, which is something I have written about in the past. From a business standpoint, Go Fund Me is a great idea. They know their role in the process of helping people raise money, and they don’t run from it. That’s all well and good - you can’t fault them for being good at something. While I have no issues with how they do business, I think it is important for people to see all sides of everything - including how people get in the situation of needing a Go Fund Me, to begin with.
The intent of this blog post is not to make people feel uncomfortable or embarrassed - rather, it is to inform and educate others about how they can avoid repeating some of the mistakes of others. It should go without saying, but it says absolutely nothing bad about a person that has relied on or used a Go Fund Me before. Sometimes life just happens. I do believe the need for personal disaster fundraising can be almost entirely avoided with solid financial planning in place if done during a time when everything is well and good.
Here are five steps you can take right now:
Save 3-6 months of your living expenses. This is a rule of thumb. But don’t stop there. Your goal should be to increase your savings and net worth throughout various checkpoints (quarterly, annually, etc) during your life. When you get extra money, bonuses, or an inheritance, enjoy some of the money but don’t spend ALL of it. Learn to save money off the top and put it away. Start maxing out workplace retirement plans (401k, 403b, etc.) if they’re offered - or start an IRA and max it out every year. Every little bit counts, and eventually, you will look back and see that you’ve saved a small fortune.
Have sufficient liability insurance. The biggest reason you want to have liability insurance is just in case. Imagine hitting a patch of ice and causing a multi-car pile-up. That $25,000 state-minimum liability coverage may not be enough. Do you work in a profession where you could be sued for an honest mistake or a misunderstanding? Do you have animals or children that could do something that you could be held liable for? What if someone is injured at a party at your house? Liability insurance is good to have just in case. When you have sufficient coverage, the odds are likely that insurance companies will settle out of court. But that isn’t your problem; in fact, it’s a good thing.
Have sufficient health, disability, and life insurance. For those that don’t have health insurance through work, the government has affordable plans subsidized by taxpayers. Don’t go without health insurance. Even if it is the cheapest kind with the highest deductible. Just one major health incident without health insurance can lead to financial ruin. While every working American has some sort of disability benefit through the government, it isn’t very much coverage at all. Having the right type of disability insurance is everything. The younger you are, the cheaper it costs and the more likely you are to need it. You want to ensure you have OWN-OCCUPATION insurance coverage to protect your ability to earn income. Otherwise, your insurance will require you to work in ANY occupation you’re capable of if that’s what the contract specifies. Life insurance is pretty self-explanatory, but premature death is one of the top reasons people create a Go Fund Me. Unless you have saved enough money to self-insure (99% of us haven’t), it is worth looking into the different types of life insurance that I wrote about last year. And don’t forget to insure stay-at-home moms. The replacement cost of a parent that takes care of children and the house is significantly more than you think.
Self Insure what you can. There are all kinds of ridiculous things you can finance and insure. While insuring your health, life, and ability to earn money is paramount to financial freedom, there are many things that are mathematically a waste of money. Pet insurance, phone and electronics insurance, insurance on furniture, and most things that you could save up the money to outright buy with cash to replace. If you’re reading this thinking I’m crazy you probably don’t have enough money saved up to self-insure for these items. That is to say. . . Insurance companies aren’t in business to give money away.
Prepare for what happens if ______. There are other things unique to your specific situation that could adversely impact your financial plan. I like to ask my clients this: what could happen that would completely screw things up for you financially. And then create a plan to preemptively address the scenario should it happen. If I ask ten people I might receive ten different answers. Many would probably list something I wrote above, but there are always unique outliers. If something else is on your mind, let’s talk sometime. . .
