A savings account is something that people consider to be safe. You’ve got protection up to £85,000 if anything were to happen to that bank but that doesn’t mean your money is completely safe. If another financial crash were to happen you could find your situation changing overnight and even if you were in a very stable position before, your savings could still be at risk.
Don’t worry though, that doesn’t mean you’re guaranteed to lose it all during another financial downturn. If you take the necessary steps to protect your money before anything happens, you’ll be ready when it does and your cash will be safe. If you’re worried about your assets, here’s how to protect them.
Have An Emergency Fund
The main reason that people lose savings during a financial crisis is that they run into trouble and the only money that they’ve got to keep themselves afloat is their savings. The simple way around this is to create a separate savings account that you can use as an emergency fund. That means that if you lose your job or your business hits hard times, you don’t have to immediately dip into your savings accounts or sell off other assets to cover your living expenses, you can rely on your emergency fund instead.
Minimize Your Outgoings
The best way to build up an emergency fund and reduce the impact of an economic crisis on your finances is to minimize your outgoings. You’ll have more surplus to save and you can get by on a lot less money. Most people when they hear this advice will say that they absolutely can’t cut anything out of their budget, but that’s rarely ever true. Cutting out brand name foods and buying generic ones, for example, will cut huge chunks off your budget.
The majority of people are also paying far more for their mobile phone than they should be. Reviewing your entire budget and cutting down where you can is actually fairly easy and it doesn’t mean you can’t have any luxuries.
Make A Will
Protecting your family financially is just as important as protecting yourself. If anything were to happen to you and you didn’t have a will in place, your family will have to go through a lengthy legal process to split up your estate. This can give rise to disputes amongst family members and it makes an already trying time all the more difficult. There is also the chance that some of the money will go to places that you didn’t want it to. All you need to do is contact somebody like Bannister Preston and get them to write you a proper will. If the worst were to happen, your solicitor will carry out the instructions of the will on your behalf and your family won’t have to deal with any of the legal issues involved.
When you’ve got money in a savings account, it’s just going up in value as you gather interest, right? Technically it’s going to increase in value on paper but that doesn’t take inflation into account. Imagine that you’ve got £1000 in the bank, you can buy a certain amount of goods with that £1000. Now, if inflation is at 2 percent, those same goods are going to cost you £1020 the following year.
If your rate of interest is only at 1 percent, you end up with £1010, that means your money, in real terms, is actually worth £10 less than it was the year before. These numbers are simplified for the example but the concept works the same.
Putting your cash in a savings account and just leaving it doesn’t make it grow and if inflation is particularly high you’re going to be losing money year on year. It’s far better to find some sensible investments for your money so you’ll actually see it grow. If you put your money in a hedge fund you reduce your risk of inflation chipping away at your money, however, you should bear in mind that there is always the risk of losing it.
If you’ve got a lot of money to protect, consider putting it into property. It’s a fairly safe investment that you’re likely to see a return on.
Overpay Your Mortgage
Having a roof over your head is the most important thing during times of financial hardship. It doesn’t matter too much if you can’t have all of the luxuries that you normally have as long as you’ve got all of your basic needs covered. Paying the mortgage can be a struggle during a downturn and if you default on your payments you’ll land yourself in big trouble.
You can avoid this by paying in extra when things are going good. If you’ve got the money there you can clear more of the mortgage. The benefit of this is that you can then cut your monthly costs when you need to by reducing your payments a bit.
Know When It’s Coming
Reading the financial papers is a bit dull but it can save you during a financial crisis. If you’re caught unaware and you don’t have time to prepare for a reduced income, that’s when it’s going to land you in serious trouble. But if you can see the signs in the weeks and months leading up to a crash, you can be ready for it. Things to look out for are large companies running into sudden financial trouble, or governments making large-scale changes to financial legislation.
However, don’t fall into the trap of thinking that just because things are going well that a financial crash can’t happen. A downturn can strike at any time so make sure that you’re prepared all the time.
The economy is an unpredictable beast and there’s no telling when it could run into serious trouble. The last time this happened there were thousands of people all over the world that hit serious financial speed bumps. If you want to avoid that happening to you, start protecting your money now.