What Is The Biggest Risk To Your Financial Success?
Nearly everyone has ideas about what would affect their financial success most in today’s risky investment world. While the economy is doing well now, there always are times when the stock market goes down and even crashes in some cases, and some might consider the volatility of investing there as the biggest threat.
Some may worry about automation through artificial intelligence and robotics perhaps one day replacing them at work, and others may consider politicians, financial advisors who care more about earning commissions, and other unknowns in financial institutions as being the main risks to financial success.
While it’s true that all of these carry risks to your finances, the fact is that those who have planned for these situations are able to get through them because they saved or invested when they needed to. So ultimately the biggest risk to your financial success is yourself. But we’ll show you some ways to reduce your other risks below.
Minimizing Your Financial Risk Through Budgeting –
Often when you hear the phrase “on a budget,” the assumption is that the person on a budget is on the lower end of the income spectrum and that they’ve chosen to live a frugal lifestyle. While some people do choose this either temporarily or permanently, you can be a budgeter and still live a comfortable lifestyle. The core of a sound budget isn’t just living cheap; it’s knowing exactly where every dollar of your money is going, making sure your expenses are not exceeding your income each month and having a savings plan in place. The main reasons most people don’t budget are the following:
1. They just don’t feel they have the time to gather up all their financial documents to do it.
2. They wrongfully assume the best way to manage expenses is just to put them all on a credit card because they assume they’ll just pay them off eventually.
3. They don’t take advantage of technology that could help them.
Budgeting does take time in order to gather up information on your income and expenses, but the simple part of it is prioritizing your expenses. You want to make sure you have your essentials covered such as food, shelter, clothing, transportation, utilities, taxes, and a few other pertinent expenses. Your luxury expenses are where you need to cut down on if your expenses are exceeding your income, or if you don’t have much cushion to build an emergency savings plan. Sometimes the issue isn’t just knowing what you have to pay for but making sure you’ve accounted for the timing of your bills. It’s important with each pay period that you pay off all-important upcoming expenses within the month such as rent and utilities ASAP, and then take care of the essentials that follow them.
Taking On Debt Risk Through A Debt Management Program –
While you yourself are the biggest risk to your finances, the second risk that follows this is debt. If you’ve already gotten into heavy debt whether it’s with multiple credit cards, mortgages, utility providers, the government or others, there are still ways to budget and get out. Now, if you’ve had difficulties budgeting and getting out or already are seeing collections agencies calling you, you may need to consider a Debt Management Program to deal with your unsecured debt. There are a few things to know before you do:
1. The plan is managed through a reputable non-profit credit counseling agency.
2. This is NOT debt settlement and most credit counseling agencies won’t offer both. Debt Settlement will ruin your credit score for many years (7-10 years usually).
3. If you contact a credit counseling agency, make sure they discuss ALL of your options and not just their Debt Management Program. A DMP is not a “one size fits all” type of program. It’s not a good option for some people (those who are too far in debt and only bankruptcy would help them).
Self-running your plan is an option but some creditors are not willing to work with you directly. If you find yourself unable to work with them, a credit counselor can help devise a plan for you. But you’ll likely have a better chance of success than Debt Settlement where you are only hoping that your creditors will accept a certain percentage of the debt and forgive the rest. Then, with Debt Settlement, you’ll be responsible for paying taxes on the debt that was forgiven because the IRS sees that as income. Your credit score will also tank with Debt Settlement and it will be many years before it can be fixed. But if you’re able to get a reasonable Debt Management Program together with your counselor, you may find your debt can be paid off sooner than you expect and your track to success reached sooner. You’ll save money as well with the reduced interest rates and fees waived.
The most important things to look for in a credit counseling agency are its reputation, and whether or not they focus more on selling a management plan, or promoting creating a budget and key financial information. The good agencies are non-profits who emphasize putting the power of financial management in the hands of the consumer rather than themselves. The path in debt management should be one that eliminates debt rather than adding to it.