Life is truly unpredictable. Being prepared is critical to surviving uncertainty. People have become more aware of the adverse outcomes brought on by nature, by accident, or even by deliberate actions. People often worry about the what-ifs and think about what they can do to protect themselves and their families.
Risk avoidance is, no doubt, the reason why insurance companies and other firms thrive. After all, with the right preparation, anyone can turn a potential financial or life-threatening tragedy into a mere temporary setback. Listed below are some ways you can protect yourself from the unexpected.
#1 – Build Up An Emergency Fund
One of the most popular financial safety nets, an emergency fund is a sum of money you set aside to cover any sudden expenses resulting from medical or financial emergencies. It may include unexpected car repairs, property damage, medical bills, or even unemployment.
Situations like the COVID-19 pandemic, recessions, and other mishaps can change your financial security in an instant. The possibility that employees could lose their jobs and some businesses would need to close lingers. When these things happen, an emergency fund will support you throughout the unemployment.
Financial experts suggest maintaining a separate savings account with an emergency fund of three to six months worth of living costs.
#2 – Stock Up On Basic Needs
Even before the current pandemic, survivalist households were stocking up to prepare for the worst. Survivalists fortify their basements and fill it up with non-perishables and other items their families would use daily.
There is a limited need to stock up for an extended period of time, but there is value in keeping extra canned goods, instant noodles, and other food items with more extended shelf-lives in your home. Toiletries and medications are also worth stocking up. This can help you get by for a few days/weeks in the event there is a run on groceries or you cannot reach a store.
#3 – Proof Your Home
Most preppers also fortify their homes to protect every household member from the dangers brought by the unexpected. You don’t need to prepare for a total collapse from say a nuclear attack. However, it is good to take a few basic precautions to secure your home against theft and home evasion.
We recommend setting up a security system. Simplisafe‘s DIY security system is a great budget option. Surveillance cameras and security lighting placed around the exterior of your home can also deter people from entering your home. Check out our article on selecting a home security system for more guidance.
#4 – Improve Online Security
With so much of our personal and financial information now stored online, online safety is crucial to protecting your life. Basic steps to follow include:
- Strong passwords – use services such as Last Pass that help you generate and store complex passwords
- Use 2-factor authentication whenever it is offered
- Take advantage of free tools offered by your email provider to scan email for potential fraud risk. Never open an attachment or link from an unknown sender
- Don’t answer the online quizzes frequently found on social media sites. These quizzes often contain questions that are used by websites as security questions. Filling out these quizzes is handing your critical info to hackers
#5 – Maintain a Strict Budget
Budgeting sounds like a cliché, and some individuals often disregard this spending method as it does not work for them. But having a sound, realistic estimate of expenses, and self-discipline will keep you from buying things you don't need. The money you stash away from minimizing your splurges will add up quickly, making the whole scheme effective.
An excellent example of unwise spending would be running up credit card balance and then failing to pay off the balance. This expensive habit doubles the damage to your bank account by leaving you in debt while incurring interest fees. Doing this often enough can result in bad credit further hurting your financial health. To protect your credit status, be wise on using your credit cards, and make sure that no one can steal your identity by using services like Lifelock.
#6 – Live Below Your Means
As your income increases, it is easy to slip into a trap of lifestyle creep. If you increase spending with each income increase, you will miss out on opportunities to save more money in the future. Maintaining the same spending habit will help you enjoy more significant savings than those who committed to new liabilities such as a new car, travel plans, and other lavish expenditures.
#7 – Invest For Retirement
It is understandable why many young people choose to avoid the struggle of saving up for their retirement. After all, why should you save money for something that is decades away? Unfortunately, this is the kind of thinking that leads many Americans to delay retirement or live on extremely limited budgets during their retirement years.
Saving up ahead of time allows you to take advantage of compound interest. Many employers offer 401(k) or 403(b) retirement plans. People take advantage of these privileges, primarily when provided by the company, as they can also use some of this money when the need arises.
#8 – Invest in Assets
Playing the stock market is a high-risk high return investment option. Investing in assets is a safer long-term investment plan. Real estate is a classic example where you can buy a piece of property and convert it to a rental home that pays for itself. Long-term you will also reap the benefit of appreciation on the price of the home.
#9 – Have the Right Insurance Coverage
In the case of accidents, health issues, and other unforeseen events, a good insurance policy protects you from unforeseen financial impacts.
Evaluate the different types of insurance to balance risk with the cost/benefit of the policy. A disability insurance policy, for instance, can be essential if you work at places where the risk of sustaining significant illness or injury is high. An umbrella policy, on the other hand, provides extra liability coverage where your other insurance policies fall short.
While it is important to find excellent coverage, it is also equally as important to look around for lower insurance rates and avoid having multiple insurance policies that have the same benefits. This step will significantly lower your monthly bills on insurance premiums.
#10 – Build Multiple Streams Of Income
Having multiple sources of income is no longer considered a luxury but rather a necessity. If there’s anything the last recession taught us, it is that no job is safe. The economy fluctuates beyond anyone’s control, and this becomes a nagging problem for people whose only source of income is their day job.
People are beginning to realize the financial risks of relying on a single source of income. Four out of ten Americans have a side hustle or additional source of income. What’s more, should you ever find yourself losing your 9-5 day job, you have the opportunity to grow your new sources of income and potentially make it your full-time work.