If you’ve spent a great deal of time and effort improving your financial situation, you’ll want to protect your work. But how? There are a number of ways that you can ensure your wealth is secured under lock and key, but sometimes a simple safe won’t do. Here are some more advanced – yet commonsense – approaches to get the job done.
1. Prayer
I’m putting prayer at the top of the list because it’s the most important. A number of unforeseen circumstances can strip away your work, and you’ll need God’s help to be able to bless your family and others. Remember that ultimately, God is in control, and you are not. However, that doesn’t mean that God doesn’t want us to do anything about protecting ourselves and our financial situation. The Bible has a lot to say about protecting our assets and be better equipped for any problems that might come our way.
2. Spending This Month’s Income Next Month
I talk a great deal about this concept, and for good reason. If an emergency were to come your way, and you didn’t have time to move money from your emergency fund into your checking account, could you still pay for your emergency? Spending this month’s income next month is a way to ensure you have a healthy checking account – funded with several thousand dollars on average.
A side advantage of this is that you’ll know exactly how much money you can spend next month. Let’s say your income came to $2,879.00 for this month. Then you know you could spend $2,879.00 for next month! This keeps you from overspending and allows you greater control over your financial situation. Make sure to combine this financial self defense tactic with the use of a budget!
3. Emergency Fund
There are times when you’ll need a greater portion of money saved up for an emergency. This is one of the most important types of financial self defense, but most Americans don’t have one. According to a nationwide Bankrate.com poll, fewer than four of 10 American adults have an emergency fund to fall back on in case of financial disaster. Yikes!
How much of an emergency fund should you have? Dave Ramsey recommends 3 to 6 months worth of expenses.
4. Diversification – of Everything!
Another great way to protect your household is to diversify your investments. Don’t invest in just one area, split your portions to several investment areas. One way to do this is through the use of mutual funds.
Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land. – Ecclesiastes 11:2 NIV
But don’t stop diversifying at your investments, diversify your income sources as well! The more sources of income you have, the better off you’ll be if you lose a job. Having two part time jobs instead of one full time job can be beneficial. Or, have a primary job and a few side jobs! However you slice it, you’ll be better off if you have multiple income sources.
5. Insurance
The last financial self defense tactic is to ensure that you have adequate insurance to cover serious financial troubles that might come your way. Here are a few types of insurance to think about that you might be lacking:
- Term life insurance. You can find low cost term life insurance to help your family deal with the lack of income after your passing. This is more like family financial defense, but still important.
- Complete replacement cost homeowners insurance. Many people don’t think about the cost that actually goes into rebuilding a home after a disaster such as a fire. Complete replacement cost homeowners insurance makes sure that even if the prices rise, you won’t get stuck with the bill.
- Identity theft protection. More of a type of protection than a type of insurance, identity theft protection will help you sort through the details if you become a victim of identity theft. You are assigned an agent who specializes in helping you call the appropriate agencies and organizations to get you on the right track.
What are some of your financial self defense tactics? Meet us in the comments!
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Great Article. I like the fact that it begins with Prayer. After prayer, for me, it is tithing. The two go together; it the ultimate defense strategy. It works for me.
Samirian Hill
http://budgetwisefinancial.com
twitter: moneywisdoms
Anyone can be frugal, but not everyone can create multiple sources of income, especially multiple sources of income that are passive, which earn you money as you sleep with little or no time spent on managing them.
That’s something that I find pretty impressive, and one of my current goals is to create enough of these multiple sources of passive income to match the salary of my full-time job in case anything were ever to happen to cause that job to disappear.
Nice article. I have not seen very often the idea of spending this months income next month. While it seems very simple, I would bet that simple idea would transform many families money situation.