How To Save Yourself From Financial Disaster
This is a collaborative post by Ellie Jo with tips on preventing financial disasters.
What keeps you up at night? What makes you sweat and quiver with fear? If it’s the possibility of ending up with nothing in your bank account well, you’re not alone. A lot of people would put this at the top of their greatest terrors and it’s not hard to understand why. Beyond the uncertainty, it can put an immense level of pressure on your family if you don’t know where your next paycheck is coming from. It can be even more damaging if you lose your way to make an income. We’re going to explore this issue in this article and ensure that you know how to tackle the problem the right way.
How to Prevent Financial Disasters
Multiple Incomes
One of the easiest ways to make sure that you are keeping your finances safe is to have multiple incomes. Experts recommend, regardless of your earnings that you do have more than one income. Ideally, you should also make sure that you have different types of incomes as well. For instance, you may want to consider a passive and active income.
A passive income is something that you won’t need to focus on and an example of that would be an investment. For instance, you might buy stocks. If you manage these correctly, you won’t have to spend time deciding when to buy and when to sell. Instead, you can basically earn in the background. There are lots of incomes like this including high-interest saving accounts. You just need to make sure that you are finding a way to make your money work for you.
As well as a passive income, you should make sure that you also have a side hustle. A side hustle will take time, but it’s something that you will easily be able to fit into your schedule. For instance, if you are constantly on your laptop, then you can think to make this time more productive by blogging. Blogging will allow you to earn more simply by writing about your thoughts, opinions or feelings. To make money through blogging you just need to find a topic that you feel comfortable with. You can then write for a niche and you’ll soon get interest from companies that are keen to use your blog for promotion.
Finally, there’s active income. This is your main income and it can be anything. It may not provide much job security particularly if you are part of a certain industry. Many industries are now relying on freelancers. With a freelancer contract, an employer can cut you loose with very little notice. We prefer Fiverr for freelancer work. There will also be periods where workloads are lower and you need to be prepared for that.
Protection
As well as having a second and potentially a third income, you also need to make sure that you have protection in place. There are many forms of protection. For instance, if you have dependents, then you might want to consider a life insurance policy. A life insurance policy is going to pay out if you pass away. The benefit of this is that you can make sure that your dependents are protected regardless of what happens.
When you are thinking about life insurance policies, do make sure that you understand the limits that are on a particular policy. They won’t provide money in every type of situation. A big one that is often not part of the plan is suicide. If you die after committing suicide, there’s a good chance that the life insurance policy isn’t going to pay out at all.
Another form of protection is disability insurance. According to disability benefits law, you are entitled to a certain level of benefits if you are unable to work. However, this may not provide you with the lifestyle or quality of life that you want. That’s why it can be worth exploring disability insurance. This will payout if you are injured at work or even at home. If you are unable to work after an injury, then this will ensure that you can still get the income you need to protect yourself and your family.
Again, it’s important to understand the limits of your disability to insurance. You need to understand the difference between short term and long term disability insurance. What is short term disability insurance? It won’t provide coverage that will payout for the rest of your life usually. You need to understand exactly what type of accidents and issues are covered and how long you will receive the payout.
Assets
Finally, you need to think about the assets you have and how you will be able to use them effectively. You might have heard about the concept of dead money. This is used to describe renting property. So, why is renting dead money? Well, it’s providing you with no financial benefits long term. That’s a problem if something happens to your income. If you suddenly lose your job, you’ll have about three months before your landlord considers kicking you to the curb.
To make matters worse, even if you bounce back, you’ll still be about three months behind on rent. Now, with property things are a little different. You’ll be able to negotiate mortgage payments and push them back until you get back on your feet. You might even be ahead of your payment schedule which gives you a little time.
Of course, if you are renting, you can consider paying a couple of months upfront and this gives you a little safety cushion. Alternatively, you might want to think about saving some cash. By saving a couple of months of rent, you can make sure that you are going to have a place where you will be able to live.
This saving fund should be untouched and be separate from savings that you are planning for short term purchases like holidays
We hope this helps you understand how to keep yourself protected in the wake of a financial disaster. There are many options here and most are going to be worth considering. Particularly, if it’s not just you that’s going to be at risk from a change to your financial situation.