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We have all had a tough time of it recently in one way or another, and for some finances have been hit hard. Many have lost their jobs or been kept on reduced incomes, whilst others have seen their businesses crippled or even disappear altogether. Even for those of who it has not affected in this way it has meant we have been more mindful of money matters as we cannot tell what may lie around the corner. For these reasons, it is essential to look at the importance of financial flexibility in uncertain times.
Know Your Financial Goals
It’s impossible to plan for the future if you don’t know what your goals are. Think to your short, medium, and long-term goals. Short goals may be to go for a night out in a few weeks or to buy a nice new jacket. The medium-term could be looking at things like a holiday or a new car. The long-term goals are goals such as saving for retirement or paying off your mortgage. You may find that your goals differ depending on your situation and what stage of your life you find yourself at.
Make a Liabilities List
It’s important to assess what your ongoing liabilities are? An easy way to check this is to have a look at your bank statements over the last few months and see what recurring expenses you have. You may find a number of them are wasteful, such as gym memberships or subscriptions to online services. Cut the ones that are of no use and look at creative ways to replace others, such as how to keep fit on a budget.
Consider how Secure Your Income is?
What is your job? Is it dependent on any external factors? This could guide your decision-making for long-term goals. If you are self-employed consider what factors could reduce or remove your income, such as loss of a big client, changes in industry or problems with workers, etc. You should keep your overheads as low as possible if you feel there is any risk, such as Working at Temporary Workplaces rather than committing to a long-term lease. Even if you are working for a company, longevity of employment is not a certainty unless you are on a permanent government contract business can change, companies go out of business, etc. Always have a plan for survival for some time should you unexpectedly lose your job.
The Insurance Dilemma
Insurance is always a good idea to protect you from the unexpected, but do you take out every type of insurance available to you? This is something that should be assessed by considering the cost, the benefit, and the potential negatives should you not have it. Some insurance is necessary and even a legal must-have, such as car insurance, home insurance (if you are renting or have a mortgage). Other types of insurance are optional. You may want to consider life insurance to provide for your family if something were to happen to you. What about income protection insurance for in the event of an accident which stops you being able to work for a while? It is not as common, but it can protect against a loss of income, but the downside is that it is often expensive.
