How to Protect Your Financial Security

There is no such thing as unlimited wealth. The best-laid plans can be thwarted by an emergency expense no one could have foreseen, or a catastrophe that was not even your fault. But if you keep from over-extending in the first place, you are in a better position to protect your financial security.


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    Live within your means. Know exactly how much is coming in, and how much is going out. Divide your expenses into necessary, discretionary, and valueless. With better planning and organization, you can eliminate unnecessary expenses that add no value to your life (late fees, fines, excess interest, over-purchases). Spend only what is actually coming in, not "projected income." Keep your debt low, and pay it down whenever you get an opportunity.
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    Build an emergency fund. Start with a windfall, or add a little bit each month. Keep it in a conservative investment such as a money market or savings account, so you don't have to go into debt or liquidate investments at an inopportune time. Hands off! A vacation is not an emergency. Neither is a new car, unless your old one was totaled in an accident or had a complete breakdown before its time. Large expenditures such as weddings, births, graduation bashes, cruises, college tuition, landscaping, and major purchases are certainly important, but they should be planned and funded with dedicated savings.
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    Buy the right insurance. Mitigate potential losses by transferring the risk to an insurance company. Make sure the risk actually exists. For example, pensioners don't need disability insurance, but the breadwinner of a working-class family probably does. Single people don't need big life insurance policies, but if you have a spouse and children depending on your income to pay the mortgage, buy enough to ensure they won't lose their home if something happens to you. Carry liability insurance on any vehicle you own, but maybe you don't need collision coverage on an older car if the cost to repair it exceeds its depreciated value.
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    Make lifestyle adjustments when necessary. Pay attention to warning signs, such as potential layoffs or a souring economy. Postpone major purchases in times of uncertainty. Look for acceptable substitutes for expensive desires. Explore the real reason you want to make a purchase; perhaps you can experience the same feeling of gratification without spending so much money.
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    Protect your identity. Don't fall for email phishing schemes, unsolicited phone calls asking for personal information, or any offer that sounds too good to be true. Only provide your personal financial information to trusted vendors and only if you initiated the purchase. Keep an eye on your financial statements and report irregularities immediately. Check your credit report regularly. You are entitled to a free one annually from each of the three major credit bureaus.


  • Make financial choices you can tolerate for the long-term.
  • Look at credit cards as a convenient form of payment, not an extension of your bank account.
  • Buy only what you need or have planned for; if you tend to spend impulsively, leave your wallet at home or window shop when the stores are closed.

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Categories: Insurance