The Best Tips To Avoid Financial Risk

Money is a strange thing; we need it to survive, but we also use it to live. We need to pay for rent, utility bills, food, and other necessities, but we also want it so that we can buy swish new smartphones, fancy clothes, and other treats. Whilst we should all allow ourselves some luxuries and treats in life, in order to relax and enjoy living, there is a limit. Of course, it’s hard to know this limit. It’s hard to know when one is being too casual with their spending. How can you know when a financial emergency is lurking around the corner? You can’t, but you can prepare for the unexpected. Here are some of the best tips to help you avoid financial risk.

Make a budget, and reflect on your outgoings.

The first step to avoiding financial risk is to assess your current situation. Look at your outgoings over the previous month. Pull apart the individual costs for that month; set aside the necessities such as house payments, utility bills, and food shopping. Now, look at where the rest of your money is going (the disposable income). Start to assess which luxuries you don’t need and which you’d like to leave; the treats you’ll buy may differ from month to month, but this is a good way to start thinking about how much of your disposable income you’re spending and how much you’d like to spend. Think about what you want and what you need.

Of course, there’s no reason you can’t make a budgetary limit on some of the more important monthly bills you face. Whilst you can’t reduce the amount you pay for rent, unless you have an incredibly kind landlord, you could take another look at your electricity and water bills. If they seem a little high then you could start to think about how wasteful you are during the day. Are your showers a little too long? Do you leave lights on and your computer on standby? Cutting down on these things won’t only save your back pocket but the environment too. Better yet, when appliances break, look into energy-efficient alternatives. Going green could save you huge amounts of money per month and leave more disposable income to spend on the things you need.

Don’t worry about debt, but don’t let it hang around.

Debt isn’t always a bad thing. Sometimes borrowing money is a necessity in life, especially when it comes to bigger purchases such as houses or cars, and you need a respectable credit score in order to prove your trustworthiness; borrowing money before you need a loan for these things (or simply getting a credit card) will help improve your credit score and prove that you can be trusted to pay back money quickly. Of course, whilst it’s okay to rack up a little debt and then pay it back quickly, the key here is that you must pay it back quickly. If you’ve borrowed money then you shouldn’t pay late and you shouldn’t borrow more to cover old debts; just give up your luxuries for a little while and put all your monthly disposable income towards paying it off.

Protecting yourself in later life.
Financial worries seem to worsen as we age. Perhaps wisdom makes us weary, or perhaps it’s the accumulation of costs and debts over the years. Retirement is great, in a sense, because you leave work and finally reap the rewards of labouring for decades. Yet, we live in a fragile economy, and sometimes the money a person saves up over the years (and even their pension or any state benefits) are all insufficient to cover the costs they face during retirement. It’s become necessary for many people who have left work in their later life to come up with other means of financial support.

Many retirees re-enter work on a part-time or full-time basis, but you could also consider checking out your 2017 top annuity rates report to turn your life’s savings into an annuity payment. The point is that you should do your research before caving in and returning to work because there might be other monetary options out there for you depending on your age and circumstance. It’s impossible to offer blanket advice here because everyone’s situation is different, but there are always safety nets available.

Start tracking your spending.

As mentioned at the beginning, the luxuries we buy might differ from month to month. You need to become conscious of your spending. Think about the things you buy and whether you always need the added comfort of some of the more expensive things you purchase. We’re tricked into buying a lot of rubbish, but, through strict self-management, you can start to restrict your purchases until you’re simply buying the luxuries you actually want.

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