4 Money Shocks That Can Ruin Your Finances Overnight
Financial shocks are one of life’s biggest risks. It’s amazing how quickly things can go wrong when the money dries up.
But which shocks are out there? And what can you do to mitigate them?
That’s the topic explored in this post. We look at the financial issues that can easily crop up in your life and some strategies to reduce their impact.
Sudden Job Loss
Top of the list of shocks that can ruin your finances is sudden job loss. Losing your source of income overnight makes it far more challenging to pay bills, manage debt, and maintain your savings. You can’t even build up a cushion of money to stop it from derailing your life.
Fortunately, there are some preventative strategies you can use. For instance, you can build an emergency fund today with a few months of expenses so that if the worst does happen, you have time to find a new source of income.
It also helps if you diversify your income stream. Putting time and effort into freelancing and investments can be an option, providing you with a smaller income to tide you over and prevent you from going into debt.
Hidden Fees
Another financial shock you can suffer from is hidden fees. Companies and banks will sometimes hit you with extra charges you didn’t expect (often because you are disorganized).
One way around this is to use banks and building societies with sweeping VRP solutions. These avoid overdraft penalties and credit card fees by transferring money between accounts for you automatically.
Unfortunately, most mainstream banks will simply charge you if you go over your credit limit. But these variable systems prevent that, giving you more freedom.
Natural Disasters
With climate change getting worse, the role of natural disasters on finances is increasing. People’s homes are being flooded, burned, or blown away because of higher winds, temperatures, and rainfall. What’s more, fewer areas feel safe. Extreme weather seems to be making its way to all parts of the country.
So, what can you do about this? One option is to choose a suitable insurance policy. However, these can be expensive and there may be limitations or loopholes that allow insurers to avoid paying out.
The best solution is to make your property more robust. For example, you could install flood defenses or super-strong glass and roofing to withstand winds of up to 200 mph.
Identity Theft
You might also see your finances suffering because of identity theft. Someone might steal your details and use that information to pose as you when going to the bank or paying online. Unfortunately, identity theft can result in serious damage to your credit score over time, making it more challenging to get financing.
Therefore, always use secure passwords on all your accounts, alongside two-factor authentication. Keep track of your credit reports and bank statements so you know what’s happening to your finances all the time, preferably connecting them to notifications on your phone.
If you’re a high-profile person, also consider hiring identity theft protection firms.
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