Protecting your family from loss of income should be a priority at any time. It’s especially relevant now. Even single adults should take the prospect of income loss seriously. At this time of life, your expenses may be minimal. They can, however, still mount up quickly, especially if you’re burning through savings. With that in mind, here are some important points for you to consider.
Keep on top of your financial situation
The fast pace of modern life can make it only too easy to lose track of exactly where you are in it. When it comes to anything relating to finance, this can have serious consequences. That’s why it’s vital to make a point of taking your financial pulse regularly.
At a minimum, set aside time once a quarter to go over your financial situation. If you can make time more frequently, you have less to check each time. You’ll also be able to act more quickly if necessary.
Keep some cash savings
If you’re only without an income for a short time, having cash savings can be enough to see you through. If you’re without an income for a longer period, your cash savings will at least see you through the early days. This can give you breathing space to work on a longer-term solution.
Have a contingency plan
The essence of security is to try to stop the worst from happening but to be ready for it if it does. This certainly applies to financial security. Insurance is likely to play a key role in your contingency plan. Cover types such as income protection, payment protection and critical illness can all help to protect you from various types of income loss.
If you’re employed, you may get some (or all) of these types of insurance from your employer. If you do, then check the terms and the cover thoroughly. You may find that you’d feel more reassured with additional cover that you arrange privately.
As a corollary to this, think about how changing jobs could impact your benefits. You will almost certainly need to arrange your own cover for any time between jobs. You may also need private cover during your probation period.
Make sure you have all the insurance you need
As a rule of thumb, if you have any kind of legal or medical exposure, it’s advisable to have the backing of an insurance company. Some types of pets generate both (especially dogs), which is why pet insurance can be so valuable. Outside of this, it may be reasonable to self-insure when times are good.
By contrast, when times are more challenging, you are likely to struggle more to cope with unexpected expenses. That’s when insurance can really prove its value. Given that changes in circumstances can happen both unexpectedly and quickly, it can make a lot of sense to be fully insured at all times.
Prepare yourself to pivot
If you lose your income, ideally, you’ll want to replace it as quickly as possible. This is true even if you have insurance. Remember, the less you need to claim on insurance, the more attractive a client you are.
One option is to have a side-hustle alongside your regular source of income. If your regular source of income is lost, you can scale up your side hustle. Scaling up an existing business is likely to be much quicker than starting one from scratch.
If, however, you don’t want to commit to a side-hustle, you can pursue a hobby and/or studies that you could potentially monetise if necessary. Ideally, these would be in an area that would be likely to be doing well even if your main professional area is stagnant.
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Approved by The Openwork Partnership on 26/07/23
