A lot of people don’t realize quite how much financial risk they are in. We think of real peril as being not having any job, having more debt than you can manage, and so on. But the truth is that even if you are earning well, unless you’re truly prepared for financial risk, losing your ability to make money can instantly raise the stakes to a serious degree. If you’re not yet on the threshold of financial independence, you have to protect yourself.
Achieve economic freedom
If losing your job is such a disaster that it would flip your life upside down, then it may be worth looking at freeing yourself from that risk in the first place. Economic freedom is about not being 100% dependent on your career and it is achievable. You can, for instance, start budgeting for investments right now. Even if you don’t have a lot of cash to spare, a little bit towards investing every month can be the beginning of a snowball effect that could see those investments growing and growing over the next five to ten years. It’s not impossible to be able to live entirely off dividends from investments. But, it might also be a good idea to look at more active ways to earn outside of your jobs such as side-hustles and self-employment opportunities that you can plan to scale in future if your job goes to the wayside.
Know your rights
Besides losing your job, you can also have your income taken away from you. The most common way this happens is due to health issues. We all know about accidents and injuries, and you should always be willing to make a claim when you can reasonably expect a good result. But see Dolman Law and you can find out that medical malpractice can be just as much a factor. When a good treatment goes bad, it can end up having debilitating effects that see you unable to return to work, even if only temporarily. Holding the right people accountable can ensure that you’re left hanging out on a limb by a healthcare provider’s mistakes.
Build up your protections
Making a claim is a reactive measure and one that should be taken when appropriate. Proactive and protective measures should be taken all the time, even when it’s plain sailing ahead. See Combined Insurance for examples of income protection insurance that can make sure you’re not left entirely at the mercy of fate if you get involved in an accident that’s no-one’s fault or is left disabled by illness. An emergency fund can be of great assistance, too. Have enough money set aside to keep you funded for up to four months, to serve as a financial life raft if you lose your job and have to go searching for another.
We can’t future-proof or finances or protect ourselves from every potentially bad thing that could happen. We can, however, recognize the most common risks: sudden layoffs and career-ending injuries. Protect against those two and you are much more likely to be able to make your way through to the other side of a crisis.