5 Ways to Protect Yourself Financially

3 - 5 Ways to Protect Yourself Financially - Header ImageThese days, financial planning is more complicated than ever. Between the rise of self-directed retirement accounts and the numerous financial products out there, it’s easy to get confused and feel overwhelmed by the amount of information out there – not to mention the scale of your financial responsibilities.

That’s why it’s so important to get the basics right. A solid financial foundation can help protect you from the most common personal finance pitfalls and can give you a feeling of greater mastery and control when it comes to all the financial decisions you need to make in your everyday life.

These five critical areas will help you get started.

First: Emergency savings

You’ve probably seen and heard this advice in countless places, but it is simply that important.

Having a cushion of cash to help you through the inevitable hiccups, minor emergencies, and life changes that you’ll encounter is invaluable. Emergency savings can help reduce stress on every level and help keep your finances on solid footing.

How much to save? It really depends on your situation. Financial planners often suggest keeping 3 to 6 months of living expenses set aside. If you own your own business, have a large family, or use a high-deductible insurance plan you may want aim for at least this much or even more.

If you’ve struggled to save, however, don’t let the idea of having to put aside several thousand dollars deter you.

The most important thing you can do is to save something, so start small if you need to – every little bit counts and can help you build momentum over time. This is a great lesson to instill in kids as well. A savings habit is a skill that will serve both you and your children for a lifetime.

2. Make sure you’re properly insured

Insurance is a major line item in many family budgets, and its importance can’t be overstated. Whether you own a home or rent, and whether you drive new car or an old one, having appropriate insurance coverage can save a lot of stress and cost in the event of an emergency.

To help your insurance work for you, make sure to:

  • Read the fine print of your policy to check that you have adequate coverage for your needs.
  • Shop around to compare both prices and services. Many insurers look for ways to lure customers away from the competition, so you may be able to significantly reduce your premium without sacrificing coverage.
  • Consider what budget adjustments you may need to make to balance your insurance and healthcare needs with other financial priorities. Many families struggle with the cost of healthcare – that makes critical to approach the subject strategically and with a big picture financial plan in mind.

It’s important to note that when it comes to healthcare especially, avoiding expenses today can wreak havoc on your health and on your finances in the future.

If you or someone you know is struggling with the cost of healthcare, we strongly encourage you reach out to the many government and non-profit assistance services available to help consumers reduce healthcare costs. Services may vary by location and can depend on your state of residence.

3. Plan ahead for hidden fees

 Hidden fees are often hiding in plain sight – bank overdraft charges, account maintenance fees, late fees, and everything from new debit card charges to returned checks. These individual financial services charges might be small, but they can grow into a serious drain on your finances in no time.

To avoid them, plan ahead and keeping your banking organized.

Here are a few ideas to get started:

  • Consider switching to a cheaper bank. For example, if you eliminate a $10 monthly service charge by getting a free checking account, you’ve just saved $120 a year.
  • Set up automatic payments or debits to make sure that your bills are paid on time – and make sure there’s money in the bank to cover those bills. Just ensure that your payments will be received before the payment deadline.
  • Call your financial institution if you get in a bind. Ask to reschedule a payment or work out new payment terms – you may be surprised at how willing many banks are to work with you, especially if you speak up before there’s a problem.
  • You should also call if you do get hit with a late fee or make a mistake. Find out if your customer loyalty can be rewarded with a refund for the fee. This is especially pertinent if you’ve been a longtime and loyal customer. Not all companies will honor these requests, but it is certainly worth asking.

4. Keep your identity safe

 Protecting yourself financially also includes smart shopping. That doesn’t just mean finding the best deal: it means protecting your information and doing what you can to avoid identity theft.

If you do a lot of shopping or banking online, remember to:

  • Use a credit card – rather than a debit card – for online transactions. It’s easier to be reimbursed for fraudulent credit card transactions, and it won’t tie up your cash if there’s a problem.
  • Keep your passwords memorized, and use a different one for each site. If you need to write your passwords down, make sure they’re under lock and key (and not in your wallet!).
  • Never click on emails that have urgent fraud alerts, personal messages from your bank, or requests to reset your password. There are numerous scams that take advantage of email, so a good rule of thumb is to physically enter your bank’s web address into a new browser window to check messages and reset your password.
  • Remember that government correspondence will only come in the mail. The government will never request information by phone or email.

Of course, protecting your private information requires a bit more action. Consider implementing these identity protection habits as well:

  • Get a paper shredder. While cyber security gets a lot of attention these days, trash is still an effective (if old-fashioned) way of obtaining private information. Shred credit card offers and anything with identifying information before throwing it away.
  • Alert your financial providers that you will not be using your Social Security number as an ID. Most service providers should offer alternative means of identifying yourself, and documenting this preference can help alert these firms to potentially fraudulent activity in the future.
  • Order your free credit report every year and make sure that all the accounts and activity reported are accurate.

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5. Make a record of it!

Keeping records might seem like the least important part of your financial life – especially in an age of automatic payments and online access to bank statements. But getting in the habit of keeping your own records can go a long way towards keeping your finances in order.

Here are a few reasons why:

  • Looking over your statements can help you spot errors, late fees, or fraudulent activity – costs that can add up quickly if they aren’t caught early. These types of problems are surprisingly common, and you can’t protect yourself from unnecessary charges if you don’t know they’re being made.
  • Seeing the implications of compound interest can be hugely gratifying when it comes to your savings accounts – and downright terrifying when it comes to credit cards. Sometimes, seeing the dollar cost of carrying credit card debt is enough to help people shift priorities, which could be the best financial protection there is.
  • Good records make for better taxes – practically and financially. Knowing your records are complete makes tax-time more manageable and can help ensure that you take all the deductions you can. Good records can also protect you in the event of an audit – and make it a lot less stressful.

But aside from the practical considerations, there’s also something to be said for the feeling of control that a well-organized financial life can bring.  Whether you’re struggling to pay debt or saving up for a new home, seeing your progress every month and keeping on top of the very basics (reading statements, filing accordingly) can help boost your morale and keep you on track.

Learn more!

 We hope that these five strategies help you build a stronger and healthier financial foundation. Of course, there’s always more to learn. For example, one of the biggest financial investments we make as parents is in our kids.

The average cost to raise a child today is a whopping $230,000 – don’t you want to make the smartest moves possible to do it?

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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Important disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.

Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.