A guest post by Sachin
It’s important to be proactive if you want your finances to withstand the next global economic crisis.
We were all shocked to see the global financial markets go into free fall over the last few years, and while it seemed like there was very little anyone could have done to protect themselves, there are actually a few things you can do. By having your defenses prepared, you will be far less likely to suffer the same kind of crippling financial losses; here are a few tips to make sure you and your finances are ready for anything.
Make sure your Savings are Safe
If you have a serious concern about the safety of the money you have in your bank, make sure to speak to your bank manager and seek reassurances. If you still have strong doubts about the likelihood of your bank surviving a financial crisis, then with the help of your financial advisor or accountant, you should decide whether or not to go to a different bank. If you move your funds, your best bet it to move them to one of the “big four” institutions: Commonwealth Bank, Westpac, NAB and ANZ, in order to increase the security of your money. Don’t start stuffing your cash under your mattress just yet, instead make sure you know where you stand with your bank and keep an eye on what is happening in the economy.
Diversify Your Investments Investing can be risky business, however there are ways to reduce the risk without compromising the returns; diversification of investments is a great way to do just this. Every investment has a certain amount of risk, but spreading your assets over a variety of investment opportunities will reduce your overall risk. Basically, if one investment goes sour, then you still have many others that can make up for it. The only way this can work, however, is if you invest in stocks that aren’t related to each other such as pharmaceuticals and software, and as a rule of thumb, you should diversify your investments over 15-20 individual assets.
Income Protection Insurance
A crisis can happen in many different ways, not just in the form of economic downturns. Unexpected illness or injury immediately inhibits your cash flow by temporarily limiting your ability to work, making it harder for you to pay down debts, support your family or keep your small business afloat. Having an income is how most people survive these days, so safe-guarding against losing yours, will help you to avoid any major upheaval from taking place. Start shopping around for income protection quotes online and talk to someone about how you can protect your income.
Set Up a Disaster Fund
With the latest financial crisis, many people are beginning to wonder where they can put their money that is safe from the effects of economic depression, hyperinflation or a natural catastrophe. Traditionally, people have used gold for this very purpose, and many people continue doing so to this day. Even through having your assets in gold won’t earn you interest, it is the world’s most widely recognized symbol of wealth, and therefore your most reliable protection against a crisis. Throughout history, people have turned to gold when money lost value, so it might be worth having at least some of your assets in gold form.