Whether you inherited your wealth or earned it yourself, the way you manage it now is critical to your future financial health. Any number of unexpected circumstances, from a sudden devastating illness to a precipitous drop in the stock market, can take a heavy toll on your personal finances. Developing a strong risk management strategy is one of the best ways to safeguard your money.
All investments maintain a relationship between risk and return. In general terms, the percentage of each moves in the same direction: the higher the risk, the greater the potential return and vice versa. Striking the right balance allows your portfolio to grow, while mitigating the chances of incurring losses. To ensure you have a strong strategy in place, complete a risk management checklist that helps to solidify your approach.
The Big List
- Learn from the past: We all have times we wish we knew then what we know now. Use these experiences to strengthen your financial skill set.
- Assure you are covered: Keep insurance policies up to date by re-assessing coverage levels each year or if there’s a change in your circumstances.
- Maintain multiple income sources: Investing in income producing options, taking a second job, or turning a hobby into a paying gig are all ways to increase your earnings and provide a safety net in the case of a job loss.
- Watch FDIC limits: Be aware of the FDIC limits for all financial institutions in which you have money. Banks can fail, but if you stay below the amount that is federally insured, you will not lose money.
- Invest in stocks: One of the best ways to combat the yearly inflation rate is to invest in stocks for the long term.
- Diversify: A well-diversified portfolio is critical to reducing risk and increasing returns.
- Don’t try to game the market: Day-trading, short sales, etc. are about as risky as it gets. Attempting to predict short term market movements should be left to professionals.
- Use loans and credit wisely: Debt is easy to take on and hard to get out from under.
- Make time for self-care: The number one cause for bankruptcy is illness. A healthy diet, exercise and stress management all strengthen your most important investment…you!
- Read the fine print: Educate yourself before you make any financial transaction.
What is Your Current Risk?
Financial risk management is necessary for people in all tax brackets. As net worth grows so too does the importance of protecting the wealth you have, worked hard to build from catastrophic loss. As an asset protection attorney, Jeffrey M. Verdon helps his clients put safeguards in place to avoid the potential for a negative outcome.
Take the lawsuit exposure test to see if you could be at risk of being the target of a ruinous lawsuit, and call or click to schedule a consultation to discuss your best options.