How To Protect Your Personal Finances

by Mike on April 8, 2017

How To Protect Your Personal Finances

Keeping your personal finances under control can sometimes be tricky because they are affected so often by outside forces. One of the most obvious is the state of the economy. It may be that you have been working hard for your entire adult life, making responsible decisions and investing your money sensibly in something like real estate. The most important function of your house is utilitarian in so far as it is the place where you live, but it also represents a major aspect of your financial security. If you find yourself in a desperate situation, you always have the option to refinance your property. This is a drastic option, but when faced with the often tumultuous forces of the global economy, it is sometimes the last best option that you have. The problem is that if the economy sours, the value of your property can concomitantly decrease. As of the start of this year, house prices in the US have rallied and are nearing the levels at which they stood prior to the financial crisis of 2008. However, as a result of the banks being so irresponsible, from late 2007 to its nadir in mid-2012, house prices crashed. This was obviously not good for anyone because, despite the lower prices, many people could still not afford to buy one because of the risk of taking on a mortgage.

It is not just the value of your house that can be affected though. If you the followed precept that saving is sensible, you may have felt somewhat cheated when the financial crisis struck. All of the money that you had amassed over the course of years of work suddenly lost some of its value. It can happen to a lesser degree when you go on holiday. Suppose you change some of your country’s currency into the currency that is used in the place that you are visiting, you may not spend it all on your trip. When you get home again, and you wish to change your foreign money back into its domestic counterpart, the exchange rate may have changed, and you will simply lose part of what you paid in the first place, and for nothing more than the pernicious nature of competing international economies. That is just one example though. It can happen on an ostensibly more domestic scale in so far as inflation will occur. The money that you saved would, therefore. have had more real life purchasing power prior to the shift in the economy. You are once again just losing out to a force over which you have no control. For some perspective, the US inflation rate has risen from 0.8% last June to 2.7% last month.

While it is true that everybody, to one degree or another, is at the mercy of the economy, there are also things that you can do to attempt to protect yourself as much as you can. There are a few traditional ways of doing this and one of them is joining a trade union. The idea is simple: if a company has one hundred unaffiliated employees, the power obviously lies with the employer because in any dispute or negotiation, the company can use its leverage (the risk of dismissing you from your role) over the employee to take advantage of them. However, when the one hundred employees act as a single unit, they take on a leverage of their own (going on strike and compromising the employer’s capacity to earn money) and they can ensure that they are treated fairly. Trade unions also will take your side in the event that you are fired unfairly or your pay has not been increased relative to the rate of inflation. Unfortunately, many companies grant their employees raises that are in effect pay cuts when you consider that everything has become more expensive. Your personal finances depend on how much you are able to earn and a trade union can help ensure that it remains fair.

Sometimes, however, you have to take the law into your own hands. This is literally true in the event that you suffer an injury or an accident while at work. This can seriously affect your personal finances because you may no longer be able to earn money, and furthermore, you will likely also have medical bills to pay. When you go to work, you are putting yourself in a situation on your employer’s behalf, and if they cannot or do not ensure that you are safe in the execution of your duties, then they are liable. Suing someone can sometimes seem rather avaricious, as if you are taking advantage of the injury to make money (and some people do do that), but if you find you are no longer able to support yourself, it is your last recourse and therefore reasonable. Hiring a company like Medler Law Firm can help you assess what is the right option for you.

If you are a business owner though, you should consider how you need to protect yourself. In the event of an accident, your business may be shut down or seriously affected, but your personal finances could be at risk too. If you are sued and the case is good, you could lose your house along with your other assets. One way of dealing with this is to insulate yourself from the business by creating an entity like a corporation or an LLC. If an employee wants to sue for a workplace injury, they will have a tougher time in court because the suit will be more complex. Either way, getting business insurance is a good idea. In what could now be characterised as a rather litigious culture, you can not be too careful.
Overall though, the best way to protect your personal finances is to ensure that they are thorough and organised. You should always pay your debts on time and in full and to get a better picture of your situation, you should calculate your net worth by subtracting your debts from your assets. Whatever the number turns out to be, you should use it to assess any future purchases or investments.

Previous post:

Next post: