When it comes to your finances, it takes only a seemingly small hiccup to put them at real risk. Poor preparation of spending or one little accident or mishap. These can be the beginnings of a hole that begins to widen too quickly to cope with. That’s why real financial gurus aren’t just about dealing with situations as they come. They’re all about preparedness and knowing the risks that lie ahead. We’re going to look at some of those risks and how you can better safeguard your own finances against them.
Knowing your finances
You can’t know how to protect your money if you don’t know what you have. Financially sound people don’t just know how much is in their bank account. They calculate their net worth. They look at all assets, all accounts, and all debts. They know whether they’re in the plus or minus. From there, they devise a budget and start putting money aside. This is about two things. It’s about cutting on costs, thus ending up with more cash in your pocket. Then it’s about what you do with that cash and how it helps you in the future.
Cutting costs is just one of the ways you can be more responsible with your money. Particularly in times of debt, it’s important to cut the bad habits and start adopting good ones. For example, setting yourself up with a debt payment strategy that tackles the highest interest loans first. Another example is protecting your credit rating by resisting the urge to pay off loans before their terms dictate it. Impulse buying needs to be curbed by an at-the-moment understanding of how much cash you’ve put aside for recreational buying. There are no miracles that happen to most people and their finances. You need to take control of it.
Know your future costs
Taking control is being just as aware of all the costs that are going to come in future. We’re not going to tell anyone to not buy a house, a car or pet. These are purchases that can really add to your life. What we’re going to tell you is to know the costs that come with them, not just the initial price tag. This even goes for the most seemingly harmless of options, getting a pet. Have you considered the medical costs? How about the potential training needs, feeding and equipment costs that come with them? Do your research on any buys that might have further costs down the line. Fit them into your budget and see if they make sense before making the leap. If you find it doesn’t fit, you might have to settle for a rental home, or a goldfish, for now.
Building your wealth
As we’ve said, it’s not about cutting costs to put money aside for its own sake. Just like everything else in this life, protecting your money means spending some of it. One of the best protections you can afford yourself is more wealth. You don’t have to be a savvy Wall Street operator to start investing. Even novices can find their way to making smart decisions that bring them back some money. For one, a lot of markets, like foreign exchange, offer test accounts. This lets you apply theory in practice without risking some money. Getting into mutual funds and looking to traders with more experience for advice can also help you start seriously growing your cash. Everyone should be investing if they want to build on their wealth, not just sit on it.
Preparing for risks
When you spend so much time building and looking after your cash, you don’t want to see it all disappear due to one unfortunate event. Yet injuries and accidents make this happen all the time. Nowadays, we live in an environment where it’s a lot easier to get these costs paid by the ones really in the wrong. Ask yourself: ‘Was I really the one at fault in that workplace injury? Can I make a claim for my bus accident’ The answer to these questions is, more often than not, yes. If you think someone else is in the wrong for an accident that costs you money or puts you out of work, you shouldn’t take it. Have the contacts that can help you get justice and compensation.
Pay now to save later
Naturally, there are unfortunate events that aren’t quite anyone’s fault. Your car can get broken into with no trace of the criminal. Your home can suffer an act of god. You can get ill and be forced to take time from work. That’s where your wealth comes in handy for helping you save your money. Insurance is an important part of protecting your overall finance. If you’re not paying a little here and there to prepare for the future, you risk paying a lot if the worst comes to pass. Get an idea of the different aspects of your life at risk and whether or not insurance might be the right step for them.
If you own a business, then it can be just as much a liability as it can be a provider. Particularly when it comes to legal trouble and finance. Make sure that you’re on top of your accounting by creating a checklist for each week, month and quarter. Set aside time to take care of invoices and payroll. Keep all expenses and incomings documented and organised. Ensure that you’re paying the amount of tax you’re required to. Failing in any of these can put you in legal hot water that can cost you a bomb and potentially sink the whole business. Be thorough, more than anything else.
If you want to be truly in control of your money, you have to protect it from the future. There’s no such thing as ‘future-proofing’, but you can get close. People care about their money and have thought of ways to protect it from nearly every eventuality. We hope the tips above set you on that path.