Top Three Financial Risks to Protect Yourself from

This month, we are talking about the top three financial risks a person may face over their lifetime. These risks can significantly impact your financial health, and if you encounter these risks you may never financially recover. Hint: it’s not the markets. It is losing your job, losing your health and getting divorced. Unfortunately, all three of these risks are happening during the pandemic. What can you do to protect yourself from the three financial risks? Read on to learn about the steps you can take now…

Let’s Talk About Cash

Most people did not learn about money in school. Unless you came from a family where they openly discussed money and financial literacy was encouraged, chances are what you learned about money may have come from society, culture or from the fears you had about money. Sweeping your money concerns under the rug is not a solid strategy if you are serious about building a fortress around your finances during the pandemic. You will need to have a conversation with yourself about the state of your finances sooner than later.

Now is time to build a cash flow statement. Take a closer look at all of the income you have coming in. Review your bank accounts and credit card statements to see what you are spending on your lifestyle. Understanding your income and expenses will be crucial should you lose your income due to job loss or illness. To get a sense of how long your money will last, you will need to calculate your monthly costs and divide this number by the cash you have set aside for emergencies.

For example, if your expenses add up to 3000 per month and you have 6000 in a savings account. Your emergency fund will last you two months assuming you have no other income coming in. As a rule of thumb, consider setting aside 3- 6 months of your lifestyle expenses. For couples who are contemplating divorce during the pandemic, you will need to set aside cash to start proceedings and be prepared to pay the bills on your own. (If you and your partner potentially get into a dispute over who will get what in the divorce.) Remember, “cash is king” for a reason: you can never have too much on hand when a major financial event occurs.

Let’s Talk About DEBT

How much debt are you in, how much of your income is being used to service debt payments, how strong is your credit? Reducing your interest costs so that you can hang on to more of your cash is an important step in addressing the loss of income or increased expenses associated with the top 3 financial risks you may face over your lifetime. Write down the amount you owe, current payments and the interest rate associated with each debt. Prioritize paying down the highest interest rate debt first. Interests rate are at an all-time low so this may be a good time to consider refinancing your higher-interest debt.

Some people don’t realize how important it is to pay attention to your credit. This is a good time to check your credit score since the bank will not consider you a good candidate for refinancing if your score is less than 650. Paying your bills on time helps you to maintain your credit score and access low-interest financing using OPM (other people’s money).

Let’s Talk About Risk

Ask yourself, what would happen to your lifestyle if you faced a disability or critical illness? Who depends on you for their lifestyle? No one ever plans to get sick. Yet many people who end up being admitted to the hospital never planned to be there. Become familiar with the health and disability coverage being offered at your workplace to ensure the coverage you are relying on is there when you need it. Can you take the coverage with you if you are laid off? Read the fine print to prevent being surprised. Look into obtaining private health life and disability coverage to fill in the gaps of your employee benefits plan.

If you did not work outside the home and you are contemplating a divorce you will need to investigate private disability and critical illness to ensure you are protected as you move toward building a life on your own.

Choose to Protect Your Financial Health

It’s not too late to protect yourself from the top three financial risks you may face over your lifetime. To do this, you will need to focus on your future financial health. Think carefully about the future you want to see happen. Anticipate the worst-case scenarios associated with the financial risks you may face. For example, improving your skills in your chosen career field will likely increase your job prospects. Yet it is also important to have an emergency fund and be prudent about your spending.Stress management is also vital to your health, along with having an income protection plan should you become sick or disabled. Finally, no one ever plans to divorce yet the costs associated with a breakup are detrimental to your long-term financial health.

Consider a prenup, post-nup or cohabitation agreement. Your long-term financial health is worth the effort!

We hope you enjoyed this read. You can read the original article here. If you want to find our live chats and more of the latest financial news, check our News Blog.