Historically, the first day of May was celebrated around the world with activities, including the crowning of the May Queen and dancing around a maypole. In modern times, the May Day festival has been merged with the Easter holidays, and it is no longer popular in most countries.

Apart from its association with ancient celebrations, the term ‘mayday’ has a less pleasant meaning. Mayday is used as a signal to indicate that a vessel such as a boat or aeroplane is facing a serious emergency. It was coined because it sounded like the French expression, ‘m’aider,’ which means ‘help me.’

When sudden disaster strikes

Two recent tragic events affecting air and sea travel made me reflect on the mayday distress signal. The mysterious disappearance of Malaysian Air Flight 370, with hundreds of passengers onboard, and the sinking of the South Korean ferry demonstrated how a routine journey can quickly turn into disaster.

Although we may not like to think about it, in the twinkling of an eye our lives can go into a negative tailspin from which it can be very difficult to recover. Just like those persons who embark on a voyage, we need to make adequate preparations to protect ourselves from the uncertainties that surround us.

Life’s unexpected occurrences are most likely to hit us where it hurts most – our pockets – as many disasters bring a monetary cost that can cripple us financially. Let’s look at some of the areas we need to consider when planning how to overcome a money mayday.

Create a cash cushion

Financial experts advise persons to build up an emergency fund, yet it is one of the important savings goals that is often overlooked. You should aim to put aside at least three to six months worth of your basic living expenses into a rainy-day account for situations such as job loss or medical needs.

It is vital for you to have a flotation device on hand if you suddenly encounter rough seas, and your emergency account will help you to have enough cash to take care of sudden eventualities. Note that buying new tyres or paying your property taxes do not constitute urgent situations to raid your account!

Some people make the mistake of using their rainy-day savings to supplement the amount required to accomplish goals such as the deposit on a home or school fees for higher education. While these objectives are admirable, you should never sacrifice your emergency fund for them.

Handle your health

While your rainy-day savings may be able to cover short-term income interruptions or minor illnesses, you will need to make other preparations to deal with major illnesses which can jeopardise your health and earning ability for extended periods.

One of the key elements in your money mayday contingency plan should be purchasing insurance for the more costly health challenges that could arise. This would offset the high costs of medication, diagnostic treatment and hospital care that you may have to meet in case of an accident or illness.

Lifestyle diseases such as hypertension and diabetes are on the rise; with them come the possibility of strokes, heart attacks and cancer. Ensure that you obtain adequate critical care health insurance that would provide a large lump sum to deal with the treatment required to overcome these eventualities.

Look after your life

As we saw with those persons who are mourning the victims of the recent travel disasters, the untimely death of a loved one can bring abject misery. Apart from the emotional upheaval, the early death of the family breadwinner can lead to serious financial difficulties if there is no proper planning.

If you have dependents who would suffer financially when you are no longer around, ensure that you have a plan for your passing which includes buying life insurance. This can give your survivors immediate access to cash to deal with funeral costs, pay regular bills and cover other expenses.

You also need to plan to seamlessly transfer your assets and possessions to your beneficiaries, according to your wishes. Your estate plan usually involves making a will, but it can also require creating a trust fund to take care of minor children or dependents with special needs.

Avoid mayday situations

The eventualities that we have just considered are largely situations over which you might have limited or no control. However, many people often create their own money mayday problems by the careless way in which they handle their financial affairs.

A lack of financial knowledge can cause persons to make unwise decisions when borrowing money or dealing with business or investments. One unnecessary loan can bring long-term indebtedness, while ill-advised investing can lead to the loss of your hard-earned funds.

One of the best defences against disaster is to educate yourself about financial matters. Include money books in your reading library, and partake of financial programmes in various media forms. Also, seek advice from investment or business experts before committing money to any endeavour.

Copyright © 2014 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, May 1, 2014

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl