5 Threats That Can Seriously Damage Your Financial Security
Most of the time, the knowledge that something can go wrong also plays a huge role in the financial planning process. There’s no shortage of threats to your finances, ranging from obvious ones like medical emergencies to completely unforeseen ones like a stock market crash.
Despite the existence of so many uncertainties and risks, a large section of the population does not have a financial plan, life insurance or any other form of protection at all!
So, What Should You Be Prepared Against?
It’s essential to understand the major threats that could bring your financial security to a halt, and prepare for as many eventualities as you can. The future is uncertain, but you can set up safeguards against tomorrow’s risks today.
Here are the top 5 threats to your financial safety, and how to avoid them:
1. Outliving Your Savings and Earnings
With modern healthcare advancing by leaps and bounds, people are living longer than ever, which means their retirement years are extended too. If you spend all your money when you’re young, how will you be able to support your lifestyle after retirement without being a burden on your family?
Assume that you will live to 100 and save accordingly. It’s better to leave something behind for your loved ones than to run short!
2. Early Death with No Life Insurance
While life expectancy has gone up, the future is still chock-full of uncertainties, any of which can lead to premature death. You need to be prepared with a financial plan that includes adequate life insurance benefits and coverage, so your loved ones can continue to meet their expenses in the unfortunate event of your demise.
Make sure to select a policy and amount that caters to all the eventualities you wish to cover, e.g. funeral expenses, college education fund or wedding fund for your kids, etc.
3. Major Life Changes and Life-Changing Events
Whether an unexpected downsizing at the workplace, business or market losses, lawsuits, natural disasters, accidents, injuries, illness or untimely death of an earning member, the unexpected can leave your family financially devastated. No matter what form it shows up in, a life-changing threat can ruin your financial well-being.
Life insurance and other forms of coverage are a good way to protect assets like your home, property, business and even your income against the risk of loss.
4. Significant Loss of Assets/Data
In the modern day, your assets are not limited to physical or “tangible” ones like your home or jewelry. They also include electronic and “intangible” forms of wealth, like online businesses, financial information stored on your computer, electronic contracts and other important documents, etc. These are all at risk.
Protect all your assets, whether material or immaterial, with the right kind of insurance as well as electronic security, regular backups and secure passwords.
5. Your Identity Being Stolen
Why do most offices invest in paper shredders or “e-shredders” to ensure that sensitive information is destroyed when no longer needed? It’s very simple, really. Identity theft is one of the most unpredictable crimes, and one that’s growing at an alarming rate. If your personal data falls into the wrong hands, your identity can be stolen.
Keep your credit cards and checkbooks secure, remain alert for any signs of misuse and shred all your mail, especially social security, credit card and bank statements.
The risks and threats we face today are not as obvious and easily-countered as someone stealing cash from our pocket. As such, vigilance and preparation is key, which is where financial planning and insurance play such a crucial role.