The global financial crisis of 2008 has shown many American families that there is a true need to be prepared for unforeseen circumstances.  Luckily, there are strategies families can use to create a buffer between your household and the world’s larger financial uncertainties.  Here, we will look at some of the factors that should be considered when you are creating an economic barrier to shield your assets and protect your family assets.

Financial Budgeting refers to the process of planning and arranging the financial affairs of your family in a way that is realistic and practical for your individual circumstances.  There are many excellent budget tools and calculators that can help give you a more objective view of your finances, and help you to truly understand where your money is going each month.

Rising Consumer Costs

Basic economics tells us that inflation is generally present in the economy and that prices usually rise over time.  In 2016, a CNN report mentioned that the cost of raising a child has gone up by 40% in the past 10 years. Over the same period, 64% of families in the UK reported that not all members of the household know their weekly or monthly budget. So, it should go without saying that these are troublesome trends that should be avoided at all costs.

The following are some ways families can manage debt and rising consumer costs:

  • Maintain Liquid Savings: Many families tap into their liquid savings to either refinance their mortgage or pay monthly bills. It is very important for families to sustainably build their liquid savings improve financial stability, manage debt wisely and have a safe monetary buffer in place for emergencies.
  • Don’t Minimize Regular Financing Expenses: Debt is an expense that cannot be avoided, and today’s interest rates can create problems for families. Even with lower-than-normal interest rates, it is wise to eliminate debt rather than sell stocks or tap into existing investment pools.
  • Consider Consolidation Loans: When debt levels are becoming unmanageable, it is imperative for families to check programs to consolidate loans, credit cards, and other consumer debts. This will generally give you the opportunity to reduce your balance sheet to a single loan with a lower interest rate.
  • Stop The Debt Cycle: Instead of reapplying for credit cards and racking up additional debts, it is important to pay off loan balances and create a budget that allows your family to save each month.  This will allow you to stop the debt cycle and avoid paying out large sums in unnecessary interest payments.

Apart from debts and financial risks, families must also prepare for unforeseen circumstances that might develop due to unexpected hardships.  This is why it is so critical to protect your family savings as a means for dealing with adversities like illnesses, a loss of a job, or a death in the family.

Achieving Financial Protection

The following protective strategies can help to create stability when families are making financial plans during such troubled times:

  • Insurance Policies:  Households should take advantage of the disability or death insurance coverage that is often made available employers and other health insurance companies.  Similarly, consider purchasing Family Life Insurance policy to make sure that loved ones are well taken care of in the event that the sole earners dies or cannot work due to an illness. Some common insurance policies include: Income Protection Insurance, Total and Permanent Disability (TPD) Insurance, and Trauma or Critical Illness Insurance.
  • Estate Planning:  Primary wage earners must ensure that their estate wishes are known and honoured in the event of an untimely death.  This is why advance estate planning is essential in order to save your family from falling into financial burden that are difficult to overcome.  Always make sure that your will is updated and reflective of your financial wishes so that you can avoid potential estate problems in the future.

Of course, one can never plan for all of life’s unforeseen circumstances.  But with a little planning and forethought, you can greatly reduce your family’s financial risk levels.  These strategies offer better protection for your family when unexpected events threaten to force your household into unmanageable debt.  

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