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.
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.
Having money is one thing, but making sure you keep it and don’t lose it on dodgy scams or to people getting access to your accounts is a whole different thing. Now that you can access your accounts via the internet pretty much 24 hours a day, anywhere in the world and from any device you have, it has also become significantly easier for those with bad intentions to gain access to this money if they want to. This steps looks at ways to protect your money online to minimize the risk of you money being taken away from you.
Keep money in accounts with verified or associated accounts access only
Many savings and investments accounts already offer this option, which essentially means that you can’t access your savings or investments directly and instead requires you to transfer money into a regular checking account first before being able to get access to your money. That regular account needs to be validated first when you set up your savings account and it means that others even if they gain access to your savings or investments account, can’t just divert the money into non-associated accounts, but to verified accounts only.
Choose difficult passwords and change them often
Most people have very weak passwords with their pet’s or children’s names, they don’t change their passwords very often and they tend to use the same passwords for several accounts, which makes it them easy target for fraudsters to try to hack. Make sure to choose difficult passwords and change them often. One way of doing this is by using a password manager that lets you store complicated passwords so there is no need to remember each one. Examples of password managers include LastPass, KeePass and OneSafe. When using these password managers you only need to remember one master password to get access to all your other ones. You can use a very difficult one by keeping a long string of random characters saved somewhere of which only you know which chunk(s) actually represent your real password. Continue reading “Step 99: Protect your Money Online”→
Being prepared for adverse financial situations is an important step to take on your way to financial freedom. Without wanting to sound demotivating (or even morbid), the “what if..” game forces you to think of unwanted but possible situations that might happen and that would set you back on your journey to financial freedom and in some cases would have far bigger consequences than just the financial effects.
We’ve already established the importance of an emergency fund for those times you have a big unexpected one-off expense you need to pay and you should also be well on your way to getting together a 3-6 month living fund in case you (or your partner) lose your main source of income and need to make ends meet until you find another job or income.
Whereas the emergency and living funds prepare you to financially deal with the consequences of a financial setback quickly and efficiently, the “what if…” game prepares you psychologically for any behavioural changes you might need to make to adjust to smaller or bigger changes in your life that might require you to adapt on a longer term.
When you make a big purchase such as a new car or appliance for your house, the selling company often provides a warranty on the product. The warranty is a guarantee for a set period of time during which the manufacturer promises a correct functioning of the product and to replace or repair the product if the product is faulty.
Warranties are very important to understand and keep as they can save you a lot of money and worries if you ever need them. This step will look at warranties and extra warranties in detail, so you can assess any current warranties you have and to allow you to compare and evaluate warranties on any future purchases.
What a warranty typically includes
Normally a warranty will specify and /or include the following:
How long it is valid for. For some products this might be no more than 6 months, other products might be covered for several years.
What circumstances might void the warranty. The manufacturer often includes reasons why a warranty might cease to be valid, such as not having done regular maintenance check ups and servicing or using the product incorrectly.
Services included: what happens if the product is faulty? Will it be replaced, repaired or will your money be refunded?
Services excluded: this might not actually be stated in the warranty, but make sure you find out what is not included if your product fails. Think of costs to do with transporting the product to the shop or factory, labor charges etc.
Does it include costs you might have as a consequence of the product being faulty? For example if your washing machine floods your house, will the damage to other objects and furniture be covered, or if the fridge-freezer breaks will you be reimbursed for any of the contents gone off?