Protecting your financial well-being
Financial risk management
It is impossible to eliminate all of your financial risk; however, there are strategies that can be used to avoid and minimize risk, and even help protect yourself from it. These are outlined below.
Selective insurance coverage
There are many kinds of insurance, from life, health and disability insurance to home, auto and even travel insurance. In choosing your coverage, it is important to recognize what insurance types constitute a need, and which could be characterized as a want, as well as the extent of coverage needed. A professional insurance representative can help you in this, but be wary of unnecessary fees.
Be sure to compare prices to make sure you are paying a fair rate. Before buying insurance, look at all of the protection you currently have, either privately or through your employer. Keep in mind that some types of insurance are very expensive and may not be necessary for your specific needs.
For example: vehicle repairs, health issues, home repairs, and/or loss of income.
One of the best financial risk management strategies is an emergency savings fund. This type of fund puts you in control. It can also help protect your financial stability and ensure your financial security.
An emergency savings fund is a part of your income that you set aside in case of a financial problem. Emergency savings can prevent you from having to borrow money to pay for an unexpected event.
It is important to remember that this module focusses on post insolvency success and preparation.
Please keep in mind that if you are currently going through the insolvency process, you might not have enough income to save for your financial goals.
This module is meant to help you plan for your financial future and consider your financial goals before your discharge. However, you might not be able to start saving and budgeting for your goals until after your insolvency is complete.
Here’s how you can setup your emergency savings fund:
- Use the “emergency fund” section of your budgeting template for emergency savings
- Keep the money in a separate savings account and ask your bank to automatically transfer a small amount of your monthly income to your emergency fund (savings account) each month
- Don’t spend your emergency fund on non-emergency expenses
Other types of emergency savings
Many people do not have the ability to set aside some of their monthly income for emergencies. An alternative to having emergency cash savings would be to start a small emergency non-perishable food fund. Every time you shop for groceries, consider buying just a few non-perishables to store in a special place for emergencies. When an emergency hits, you can use the regular food budget to handle it and you will be able to feed yourself using your emergency food supply.
Saving puts you in control!
If possible, you can start saving on a regular basis to prepare for emergencies and save for large expenses. Many financial goals rely on savings, which gives you the ability to make choices rather than going from one spending emergency to another.
Why saving is important:
- Helps you manage financial risks and gives you security (as you learned above)
- Helps you achieve important goals without having to borrow money
- Gives you choices and more financial freedom
Strategies for saving
One strategy for saving is to “pay yourself first”. This is an effective strategy to make sure you reach your savings target every month. It reduces the temptation to skip a contribution and spend the money on something else.
This strategy involves automatically directing your specified savings from your paycheque. You can do this by speaking with your payroll administrator. Your paycheque can be split into two parts, or your bank can make an automatic transfer.
The money is then automatically taken from your paycheque and put into your savings account. This allows you to pay yourself before paying your monthly living expenses and making unnecessary purchases. This approach works best when your paycheques are consistent.
If you have questions, write them down and bring them to your in-person counselling session.