It is highly important that you learn how to protect your personal finances. Loads of things can happen throughout your life that puts your money at risk. Before you know it, you’ve lost a serious amount of cash and are heading toward bankruptcy. Okay, maybe that’s slightly dramatic, but it’s a thing that certainly could happen if you’re not careful.
Protecting your personal finances is all about learning how to identify the main threats. What could put your finances in harm’s way? A whole host of things spring to mind, and we’ll talk about them all during this post. By the end, you’ll be an expert in protecting your money and keeping it safe!
Be aware of phishing scams
We’ll begin with a modern concern: cybercriminals.
You don’t need to be a genius to figure out that cybercrimes are on the rise. As technology develops and we enter a more digital world dependent on the internet, the risk of hackers will multiply. For regular people, this means there are constant threats looking to take advantage of your ignorance.
Phishing scams are the most common. They come in the form of emails or text messages, asking you to do something. More often than not, the hacker poses as a trustworthy institution – like your bank or the tax office – urging you to complete an action or log into your account. If you do as they say, the hacker steals your information, gains access to your bank accounts, and can take all of your money.
So, an easy way to protect your money is by being aware of phishing scams. It’s relatively easy to do, but you must remain vigilant as scammers/hackers get smarter.
Invest your money wisely
The more money you have in your personal account, the greater the risk of you losing it. As such, investing your funds is a genius way to keep the money safe while helping it grow. Unfortunately, some investments are considerably worse than others.
For instance, if you’re going through a mid-life crisis, you may be inclined to purchase a number of fast cars. They look cool, but you’re basically throwing money down the drain as cars depreciate in value. Likewise, avoid investments that are too risky – like cryptocurrency. You may have heard the news of the latest crypto crash, meaning people have lost a lot of money.
Instead, invest in things that will protect your personal finances. Gold and other precious metals are always popular because they tend to remain stable even when everything else is crashing around them. Real estate is another wise idea – buying a house is a smart way to wrap up a lot of cash for decades.
If you want to keep your money safe, avoid risky investments and focus on things that offer stable and slower growth over a longer period.
Create an emergency fund
Saving money is another clever way to protect your personal finances from all sorts of problems. Ideally, you want multiple savings accounts. Some exist to help you save for specific goals in life – like your first house or your child’s education. Then, you should have one savings account that’s just for emergencies.
An emergency fund exists to never be touched. In an ideal world, you will die when you’re 100 years old and your emergency fund will have loads of money in it. Obviously, we don’t live in an ideal world and problems can happen all the time. We’re talking about your car breaking down, your house suffering damages from bad weather, or a health problem that takes you by surprise.
All of these things are events or situations you can’t plan for. They’re also extremely worrying from a financial perspective. You need to pay for these things, meaning your personal finances will take a huge hit. Either you pay out of your bank account and risk being left with very little money, or you take out a loan and end up in debt.
Or, you have an emergency fund to call upon. You’ve got cash saved for years just in case something happens. Now, you dip into the fund, pay whatever needs to be paid, and your finances stay stable.
Keep your personal finances separate from business finances
This might not apply to everyone, but if you run a business or are self-employed, it is useful to keep your finances separate. What we mean is that you should have separate accounts for business finances and personal finances.
Why? Because things can get difficult when you start using personal funds to pay for business costs, etc. A lot of liability falls on your personal shoulders, meaning money can be taken from your personal account if your business ends up in debt or gets sued.
Instead, the wise approach is to form a limited company and create a separate business bank account. This separates you – the person – from your business as an institution. Any financial issues or problems with debt will no longer fall on your personal shoulders. Even if you have money in your personal account to pay for things, there’s legally nothing anyone can do to make you do this. Thus, you protect your personal finances from any business-related issues.
Avoid keeping cash in real life
Some people will tell you to take cash out of your bank account and keep it hidden away in real life. You can stuff it under your mattress or lock it away somewhere else in your home. The idea is that you have money that’s protected from any banking issues in the future.
Realistically, this is a dumb idea. Even when there’s a financial crisis, your checking account isn’t affected. If anything, you’re risking your money by taking it out of a secure place. What if someone breaks into your home and finds the cash? You’ve given them the easiest payday of their lives and cash is untraceable, so you’re never getting it back.
As tempting as it seems, don’t hide cash away in real life – it won’t offer any protection at all.
Just like that, you know how to protect your personal finances from a wide range of threats. Stay in control of your money, be wary of online threats, focus on saving/investing wisely, and keep yourself separate from any business finances.