Does money keep you up at night? You are not alone. Three out of ten adults in America say they frequently worry about debt. Money is a massive source of stress for many of us. You are not alone. You have worked hard for your money: planned, hustled, and sacrificed. The last thing that you want is something to happen to your money. Take control of the uncertain, and protect the money that you have earned.
Why Protect Your Money?
Do you know about the potential threats to your money? Many unexpected hurdles can affect your money. The best way to stop feeling vulnerable is to know your risks and face them head-on.
Inflation
Inflation can affect how much your money can actually purchase. This is called purchasing power. If you have fixed-price investments over time or just general savings, it may seem as if you have less money. This is because the cost of things in your life becomes more expensive. Inflationary risk is a real threat to your money because it means that your expected returns will be less in the future.
A concrete example is investing in bonds. If your bond’s interest rate is 3% over 30 years and inflation creeps up 11% during this time, you will end up with money with much lower purchasing power.
Hackers
Hacking is the access of personal devices and websites through illegal means to gain information, leading to theft. Since 2020, there has been a 50% increase in banking online. Hackers will go where there’s money, and they know which vulnerabilities to exploit.
Hacking comes in two forms: spyware and website hacking. Spyware is installed on a personal device with the intent of stealing personal information. This method can involve taking screenshots and monitoring keystrokes to obtain personal information to exploit you for financial gain. The other way hackers often target your money is by hacking websites that your data exists, like shopping websites and social media.
Economic Collapse
In a single lifetime, Americans have seen the financial economy struggle in significant ways. A financial crisis can come so suddenly. We must understand how to protect our money from the unknown. An economic collapse is defined differently for everyone, but it usually involves nearly every asset class taking a hit.
Even for average individuals and families, this can create a ripple effect. It can cause employers to lay off employees, houses to foreclose in large numbers, and personal investments to be rendered worthless. Consider these potential outcomes before they happen when you make plans to protect your money.
Lawsuits
You can lose a lot more than you think in court. You can lose your home, car, and life savings. If you go to court over any sum of money and lose, the judge may require you to disclose all of your assets. Not only will you have to pay back the required amounts, but you could be held responsible for legal fees and other damages. This can be an unexpected drain on your finances.
The lawsuit that most commonly affects the defendant’s wallet is a liability case. If the court finds you liable for a sum of money, often it will go for your insurance money. But what if you don’t have insurance? Or are you underinsured? Many times this leaves it open for someone to go after your assets. Protect your money and home. Be prepared for an unexpected lawsuit.
How to Protect Your Money
Knowing the risks is no scare tactic. The intention of understanding the risk is to be more aware. Knowledge is power. Free yourself from the anxiety of protecting your money. Being prepared means you have a greater hold on your future.
Buy Insurance
Insurance can bring tremendous peace of mind to protecting your money. Asset protection should be a big part of your financial plan. There are many insurance options out there: life, home, car, and long-term care insurance.
Your everyday risk of liability is high in a property that you own. So home and car are essential. What if there is an accident involving your home or car? A judge can consider you at fault, and the courts can go for your assets. Don’t let this happen.
Many people are underinsured. This is where an umbrella policy can come in handy. These are policies that can extend typical policies you may have.
Diversify Your Investments
Optimism about investing can sometimes lead to losing in a big way. Not all of your investments will always be trending up. Consider diversifying your investments. Assets perform differently depending on how the market is doing. For example, when stock prices fall, many people invest in bonds.
There are a few general ways that you can diversify your investments to protect your money. Invest in different types of funds and have a variety of assets on hand. If you’re new at investing, mutual funds are a great place to start because they are groups of stocks, and this way you will get a degree of diversification.
Asset Protection Trusts
If you are trying to protect a substantial amount of money, asset protection trusts (APT) could be an option for you. These are trusts created to shield money from lawsuits, creditors, and other judgments. It can prevent many lawsuits from even happening because the money becomes too difficult to access.
There are domestic and foreign asset protection trusts, and both come with different stipulations. Foreign asset protection trusts come with more privacy for an added layer of protection.
Separate Your Business and Personal Accounts
The first rule of bookkeeping for your business is to keep your personal and business accounts separate. Not only will this simplify things for your taxes, but it will help protect your money.
If you’re going through the trouble of establishing an LLC (or similar) and not doing this, it can cause your efforts to be in vain. This is because an LLC is supposed to protect your finances by recognizing them as a separate entity. Business and personal accounts need to be clearly separated. This will protect your personal accounts from lawsuits.
Did you find our strategies useful? What are some methods you’ve developed to secure your financial future? Comment below. And while you’re at it, subscribe to our newsletter as well.