A financial safety net is intended to protect you and your family during financial difficulties such as a catastrophic medical emergency, or periods of unemployment, or any thing else that could jeopardize your financial future. Examples of a safety net would be an emergency account where you keep the money to deal with emergencies, insurance, and warranties. This is not a one size fits all, you need to personalize it to your situation. Knowing how to start a financial safety net is important.
The best way to deal with a problem is to avoid the problem.
Don’t laugh. It’s true! If you can avoid a problem, you won’t need to deal with that problem. If it’s a financial problem and you already have money to deal with it, you won’t need to borrow money to solve it: Essentially, you have avoided two problems—the current crisis and future debt payments. An effective financial safety net solves a lot of problems.
A financial safety net protects what you have.
This is a series
This post is the first in a series of six articles on a variety of aspects pertaining to a financial safety net. In this series I’ll discuss protecting income, home, health care, transportation, and more. Please remember that I’m a guy who makes an effort to learn from the school of life. I’m hoping my experiences—along with those of others who have walked this road with me—and perceptions help some of you avoid a few lessons in the school of hard knocks. (I wanted to include all that because I’m not a personal financial adviser, nor do I have a college degree in finances. My information and conclusions come from satisfying the obligations of living.) I hope you find this series helpful.
How To Start A Financial Safety
A financial safety net is a series of safeguards you use to protect your financial future. It’s considering savings, emergency funds, and insurance, to mention just a few.
What you need to do has a lot to do with what you already have set up and in place.
It wouldn’t make scents to get car insurance if you don’t drive or have a car. it would also not make sense to buy car insurance if you already have it.
Net What is a financial safety net
A financial safety net is a strategy designed to prevent a (financial) crisis from costing you everything. An effective safety net requires planning, insurance, savings, and the elimination of debit.
Why do you need a financial safety net
“I don’t need a financial safety net; I don’t have much.” Does that sound familiar? Lots of people say it. But … You really do have “much.” Look at your life and its accouterments. If you found yourself homeless tomorrow, what wouldn’t be there? If you found yourself unemployed tomorrow, how long would it take to become homeless? For many of us, the answer is, “Not long.” Looking at the potential for loss that way, it’s surprising how much you do have to lose: If you don’t want to deal with that “surprise,” you need to take steps to protect yourself.
How to start a financial safety net
People tend to think it’s a daunting task to put a financial safety net in place. It is!—if you try to do it all at once. ??? What I don’t understand is why anyone would think that it needs to be a done deal in the first place? If you think about this as a process, it becomes much easier: Rome wasn’t built in a day. Or, even better, an old joke goes, “How do you eat an elephant?” The answer is, “One bite at a time.” Build your financial safety buffer by breaking it into steps you can take one at a time.
Planning is essential
As with any large project, you need to have a plan. I’ve already said it, “Your financial safety net will be built in stages.” Stage one is planning.
Start by considering what is most important. I’m talking about (1) basic things with big financial impact on your lifestyle, and (2) there will, certainly, be more than one thing. Here’s my list: Income, Home, Health Care, Transportation, and All the other stuff. I’ve put this list is in order from the most important (to me) to the least important—more on that coming.
What’s important to you is what’s important
Get started. This phase is almost like day dreaming, and that’s OK—impressive accomplishments have begun as dreams. Make a list of important things in your life that require financial security to maintain. Prioritize the list. Put a bit of time into this. You’ll set up your financial safety net to protect the most important category first and gradually work your way down the list. That said, you won’t want to second guess yourself once you start dedicating funds.
We will all experience tragedy be ready
Conclusion
As I said earlier, the best way to deal with a problem is to avoid the problem. This series covers how I protected my Income, Home, Health Care, Transportation, and All the other stuff. I started a financial safety net by planning and taking aggressive action to protect these categories that are important to me (one at a time). Planning is the first step to developing an adequate safety net. Planning is the first step in any victory. My next post will be on my plan to protect Income.
The next article is how to protect your income.
How To Start A Financial Safety Net
