Managing financial risk is possible, as long as there are certain steps that are taken. These steps vary in nature but they can offer a simple solution for individuals.
Get insurance
Getting insurance will protect you from financial losses. If you have assets to your name, then you will want to insure them, so that in the event of losses due to theft, or other forms of damage, they will be replaced, without affecting you financially. The last thing you want is to be out-of-pocket because of not choosing to get insurance cover.
Establish an emergency fund
Doing this enables you to protect yourself against the unexpected. By saving funds that amount of three to six months of living expenses, this is a good way to manage financial risk. The risk of having to pay additional interest, because of skipped payments, is significantly lowered by starting an emergency fund. You can use these funds in cases of emergency.
Diversify your investments
One of the basics of investing is that you should not invest all of your money in one type of asset class. Diversification is the name of the game. By doing this, you minimise the risk by spreading it. Having R100 000 to invest works well if you invest in various options. Don’t just invest it in property, or all of it in mutual funds.
Get another source of income
Diversification also pays when it comes to your income. The days of relying on one employer for a source of income are long gone. To manage financial risk, you will want to get another source of income. The risk of not having enough money to meet your needs is lowered significantly this way.
Minimise debt
Avoid taking on excessive debt and this will lead you towards the attainment of financial freedom. By minimising debt, you will spend less of your money on paying creditors off and will have more to save and invest.