Written by: Christine Luken, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
If you tune into the news, you’re going to be served up a fresh batch of financial doom and gloom stories daily. First, it was the pandemic, then inflation and high interest rates, and now bank failures. Not to mention personal financial issues like potential layoffs, increased debt payments, and skyrocketing rent. Instead of becoming fearful and anxious, implement these 5 things to disaster-proof your personal finances.
5 Steps to take to Disaster-Proof Your Finances
1. Practice Financial “Situational Awareness”
If you’ve taken a self-defense or personal safety class, you’ve heard of situational awareness. It’s scanning your environment, noticing what’s going on around you, so you’re not caught off guard by potential danger. Being clueless about the state of your money will have you in full-on panic mode when a financial disaster strikes.
Here’s what you should be aware of relative to your finances: the current value of your assets (cash, bank balances, investments, property, and other valuables), your current level of debt, and how much you’re spending every month. Download a money management app like Mint to help you practice financial situational awareness with ease.
2. Stockpile Emergency Savings
Notice I didn’t say “toilet paper,” but feel free to stockpile some of that, too! I’m talking about stockpiling some cash for emergencies. I recommend having six months of your household expenses in a savings or money market account. Be more concerned about your money being easily accessible than the rate of return. (Although checking Bankrate.com for high-interest savings accounts is a smart move.) Open a savings account if you don’t already have one. Set up automatic transfers into it weekly or monthly. Start small if you need to, even $5 or $10 a week.
Please don’t count on credit cards as your emergency fund. Creditors can reduce your credit limit whenever they want to, for any or no reason at all. A friend’s bank reduced her Visa credit limit from $9,000 down to $1,000 because an old, unpaid medical bill popped up on her credit report.
3. Be Vigilant with Your Spending
When spending is out of control, it’s like pouring your precious water on the ground in the desert. You’re wasting your most important wealth-building asset: your income. Practicing situational awareness around your spending with a money app will show you categories that are out of control. Just being aware of how much you’re spending in a certain area can help you course-correct and make better decisions in the moment.
Examine how much you spend on certain categories. Is this in line with what’s important to you and your family? What can you trim back or eliminate?
4. Keep Your Debt Levels in Check
It’s okay to have a credit card, car loan, or mortgage, so long as your debt level isn’t stressing you emotionally or financially. I recommend carrying as little debt as possible because you never know when your income might decrease for reasons you can’t directly control. You might be able to comfortably carry your debt with your current income, but what happens if you lose your job or your business takes a hit?
Tally up your current level of debt and the amounts of your monthly payments. Do you feel comfortable with it? What if your income dropped by 30% or more? Could you still make the payments? If not, it’s time to create a plan to pay down your debt!
5. Raise the Shields of Insurance
Insurance is a tool that removes financial risk you’re not willing or able to take. I know, like most people, you probably hate paying for it. I’ll admit, it’s not sexy! However, if you’ve ever made a large claim on your auto or homeowners’ policy, you know the relief of having it. Talk with your agent and see what insurance gaps you have to fill.
Please keep in mind that disaster-proofing your finances is a process. You’re not going to get it accomplished in a day, a week, or even a month. Pick several of the action items I mentioned and put them on your calendar to start the process NOW. Your future self will thank you!
And if you’re looking for a proven system that blends wise money management with emotional intelligence, the Financial Dignity® on Demand course is for you! Use promo code “brainz” for a special reader discount.
Christine Luken, Executive Contributor Brainz Magazine
Ready for money to support your happiness, rather than stress you out? Then you need Christine Luken, Financial Dignity® Coach in your corner! As the Founder of the Financial Dignity® Movement, Christine has coached hundreds of high-earning professionals, business owners, and divorcing women to pay off staggering amounts of debt and massively increase their net worth. The author of several books, including Money is Emotional and Financial Dignity® After Divorce, Christine blends wise money management with emotional intelligence.
