Now that you’re well on your way to improve your finances, this is a good moment to evaluate how you have protected yourself financially. Take a couple of simple steps described below that will greatly ensure that the wealth you build and continue to accumulate will be safeguarded even in adverse situations or setbacks.
Part 9: Protect Your Finances
When talking about financial protection, one of the first things that come to mind is the topic of insurance. Most people will at least need the following five types of insurance:
- Life Insurance – protects others around you financially if you passed away. This is especially recommended if you have others who rely on you financially (children, a partner).
- Health Insurance – covers medical bills to ensure you can afford the care you need.
- Disability Insurance – pays out money in the event of a disability that prevents you from working in the future.
- Homeowner / Renter’s Insurance – covers damage to you house and often has a liability component to cover damage you inflict upon others or their property.
- Car Insurance – covers costs and liability issues in case of a car accident both if you caused the accident or if somebody else was at fault.
I highly recommend reviewing your contracted insurance policies once a year and making sure they are up to date, as your personal situation might have changed since you took out the policy. Have a look at all your insurance policies to ensure you’re well covered and check whether to contract any more (or less) insurance if needed.
Another important part of financial protection is estate planning. Estate planning covers a couple of different things which are too important to overlook, but due to the complex and emotional decisions that often need to be made this is a topic that can be tempting to postpone.
- A will or trust – determines what will happen to your assets upon your death.
- A health care proxy – stipulates who should make important health care decisions about you should you no longer be able to do so mentally or physically.
- A power of attorney – identifies who should make financial and legal decisions if you no longer can.
- Beneficiary designations – some of your assets will allow you to name a beneficiary for when you pass away, such as your insurance policy or savings or investment accounts. Be careful that whoever you name on these assets should correspond to the information you have in your will.
- Guardianship designations – possibly the most difficult decision of all a guardianship determines who will become the guardian of any underage children you have.
Talk to the various people you would like to appoint as guardians or decision makers to allow them time to think about taking on those responsibilities. Then set up a meeting with a notary or estate attorney today and to discuss the arrangements you want to make.
Lastly, take some steps today to protect your finances online. With the increased internet access we have nowadays, it has also become significantly easier for those with bad intentions to gain access to your money. A few ways to increase your security:
- Choose difficult passwords and change them often
- Use two-step verification
- Enable email notifications when you log in to your accounts or withdraw money
- Check your accounts regularly
- Don’t use public WiFi accounts or public computers to access your accounts
Schedule in a few minutes today or tomorrow to implement these measures and ensure your accounts are well-protected.
The above is an adaptation of part 9 of the 10 parts in the guidebook to Financial Independence: 100 Steps to Financial Independence: The Definitive Roadmap to Achieving Your Financial Dreams where you can find more details as well as action plans and guidelines to each of the 10 parts. Available in both ebook and paperback format!
Coming up next: Part 10 of the Journey to Financial Independence!