Let’s Protect Your Financial Foundation
financial freedom

You have invested a lot of time, energy and passion to get where you are today. It didn’t just happen overnight. It wasn’t just handed to you on a silver platter either. Your skills, your knowledge, your accomplishments, your relationships and your possessions reflect thousands of choices over many years. As you begin practicing good money management, the next critical step is learning to protect your financial foundation.

Once you get to a good place where your daily habits are moving you towards your goals, it’s important to protect what you have so you can keep growing. Unexpected events will happen sooner or later. Some will be more disruptive than others. The best plan of action is to be aware of potential hazards, know what options are available to reduce or eliminate them, and prepare well in advance.

Managing Potential Risks

What is a potential risk? Why should you care? Financial risk means exposure to danger, damages, loss or insolvency. Your potential for financial risk can be minimal, manageable or highly probable. It depends on the choices you make and the contingency plans you have in place. Risk management should always be part of your financial strategy.

Let’s take a look at some of the most common financial risks and how they could affect your financial foundation:

  • Injury, Illness or Disability – most of us depend on our ability to work to cover our living expenses. If we can’t work, we need other sources to replace any lost income and out of pocket medical expenses. In 2019, 66.5% of bankruptcies in the U.S. were due to medical issues.
  • Job loss – the second greatest risk to your financial stability. In addition to losing stable income, you may also lose critical benefits, such as health insurance or a company matched 401k plan.
  • Property loss or damages – this could involve your home, vehicle or any belonging. A loss could be due to fire, theft, weather, accident or a lawsuit. Not only do you run the risk of having to repair or replace the property, you may have increased expenses as a result of the loss.
  • Interest rate risk – the cost of products and services increase over time. Your long-term savings strategy needs to keep up with inflation. As interest rates increase, credit cards and line of credit will also cost more.
  • Credit risk – the ability to access credit when you need it, at the best rate possible. Poor credit leads to high interest rates, lower borrowing limits and limited financial options.

Putting Plans in Place

The best way to protect your financial foundation is to take an inventory of what you have, identify the biggest risks to your assets, and decide how you want to reduce or eliminate those risks. You can start with a simple notebook, spreadsheet or an inventory app. Make sure you use something that will be easy to keep safe (think fire or water damages) and easy to access when you need it.

  • Take great care of your whole self! Reduce the risk of injury or illness with good nutrition and physical activities.
  • Take advantage of whatever medical care you can, from regular checkups to free blood pressure/cholesterol clinics. Know and track your numbers.
  • Volunteer, help a friend or neighbor, build community connections.
  • Use your hobby or skills to start a side gig. Build up funds for unexpected events. Try to find ways you could replace and/or supplement your income if you had to.
  • Increase your deductibles on your home/rent/auto insurance to reduce your premiums. Add your savings to your emergency fund.
  • Build up your Health Savings Account or set up a separate account earmarked just for health/medical/wellness expenses
  • Compare your insurance policies every year. Rates change and your record could earn you discounts.
  • Pay your bills on time. Keep your debt below 30% of your income. Build a strong credit history and keep it active.
  • Review your long-term savings and investments at least once a year. Make sure it aligns with your goals and risk tolerance.

Let’s Keep the Momentum Going

Schedule a free 15-minute coaching session to learn more about our 1:1 Financial Zen Coaching program. We provide positive, practical guidance to improve financial wellness. Let us know how we can help you build financial flexibility at coach@myfinzen.com.

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