Financial Planning to Cover Yourself During Hardships
/Being financially-savvy can help to protect you from times of hardship. While it isn’t always easy to prepare for the unexpected, there are a variety of ways to ensure your finances remain stable. With some foresight and advanced planning, you can ensure you’re financially secure, no matter what life throws at you.
If you want to protect your finances and avoid going into the red, take a look at these top tips for financial planning.
1. Understand your finances
Most people don’t know exactly what they spend their money on, which can lead to overspending and poor financial management. Even if you’re not struggling financially, it’s important to have a good understanding of where your money goes every month.
Start by scrutinizing your bank statements and make a note of what your expenditure consists of. It only takes a second to jot down a purchase but this kind of record-keeping will stand you in good stead for the future.
If you don’t fancy making notes by hand, there are plenty of programs and apps to help you get started. Capable of recording purchases, monitoring expenditure and segmenting your outgoings, keeping track of your finances has never been easier.
2. Start a pension
The future is never guaranteed, and you don’t want to struggle for cash as you get older. By paying into a pension from a young age, you can build up a healthy pension pot and free up your retirement plans.
While some people have workplace pensions, these won’t necessarily provide you with everything you need when you begin taking your pension. Indeed, you shouldn’t necessarily rely on any one pension, regardless of whether it’s a work or private pension.
Seek professional financial advice to get an idea of how much you can expect your pension to pay out and determine whether this will be enough to see you through your retirement. Remember – pensions are linked to investments so their value can drop as well as rise. Choose your pension plan carefully and only opt for a level of risk that you’re comfortable with.
3. Plan for the unforeseen
We can’t always predict what will happen in the future and this can leave our finances in a precarious state. Instead of just hoping for the best, have a plan in mind so that you’re prepared for all eventualities.
Taking out comprehensive insurance policies can help you to do this, and they’ll certainly save your finances if you need to claim on them. If your home was destroyed or damaged, for example, the right insurance policy could ensure you have the finances to rebuild or purchase an alternative property.
Similarly, medical insurance can help to alleviate the stress and worry if you fall ill. Having access to medical care and treatment should never be taken for granted, so find the best insurance policy you can.
Although taking out insurance can help you protect your finances in the future, knowing what to do in times of crisis is also invaluable. If you’re involved in a road traffic incident, for example, you’ll need to know how to get legal help for a car accident injury. When expected scenarios arise, the shock and worry can make it difficult to think straight. By planning ahead and doing some research, however, you can adequately prepare yourself for any situation.
4. Create a budget
If your wages are covering your essentials, like rent, food, and bills, you may be enjoying spending your extra cash on some luxuries. Treating yourself every once in a while will help you stay motivated to stick to your budget. By creating a budget, you can train yourself to manage your money effectively. What’s more – living on a budget could give you the opportunity to set some money aside for a ‘rainy day’ fund. Most Americans are just one or two paychecks away from financial disaster, so having some savings put aside is vital to successful financial management.
Put away as much as you can each month so that you’ll gradually build up a pot of savings you can turn to in emergencies. Whether you’re saving $10 or $100 a month, every dollar you save will be invaluable if you’re hit by an unexpected job loss, vehicle failure or illness.
5. Limit your use of credit
Credit cards can sometimes be a savvy way to purchase big-ticket items, but you have to really understand how credit works in order to take advantage of it. If you can’t pay off your purchase within the same month, it’s usually best not to use credit at all.
Although many people rely on credit cards to get through the month, this can make your financial situation worse. Most credit cards and lines of credit charge high-interest rates, so this will dramatically increase the amount you need to pay back. Indeed, credit cards generally have one of the highest rates of interest around.
In many cases, people end up paying costly monthly bills to their credit card providers, only to find out that they’ve only been covering the interest and not paying off their purchases. This can turn into a vicious cycle and result in missed payments, poor credit scores and extra charges.
If you need to access additional funds and you have a solid plan for making repayments, there may be other ways to secure the credit you need. Extending your mortgage or taking out a personal loan might offer a lower rate of interest, for example. However, it’s important to seek independent, impartial advice before you commit to any type of credit.
Protecting your finances is one of the most important things you can do to take care of your future. Whilst you can’t always know what’s going to happen, you can be sure that you’ll need an accessible pot of savings at some point. With the right amount of financial planning, you can reduce your expenditure, protect your liability and ensure you always have the resources you need.
6. Find a good lawyer
Another way in which you can protect yourself financially during hardships is by finding a good lawyer. For example, if you were involved in an accident that was not your fault, such as a car crash, an accident attorney will ensure you receive the appropriate compensation for this event.
They will support you through each step of the complicated legal process, from proving that you were not negligent in your behavior to help you cover the costs of vehicle repairs or replacement and medical fees. If your recovery requires you to take time off work or otherwise results in a loss of income, they’ll also be able to ensure you are compensated for this.
As a result, having the number or contact details of a good lawyer ahead of time is a great way to cover yourself during hardships. While you will have to pay for their services, this is a worthwhile investment that can help you maintain financial stability moving forward.
About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha, a former NFL cheerleader turned entrepreneur and financial journalist. After a brunch conversation with girlfriends, Danetha was inspired to launch a blog to explore her journey of becoming rich, sexy and confident.
