For many people, thinking about the subject of money brings on negative emotions ranging from mild confusion, constant frustration, sheer anxiety to full-blown panic. It’s unfortunate that such an essential part of our lives can sometimes cause us to experience so much mental pain.

Very often, persons will create their own money misery with their poor financial habits. Splurging in excess of their income, not planning for upcoming expenses, ignoring the need to save, and not making efforts to earn part-time income are some of the practices that can cause distress.

While careless spending and budget shortfalls are the usual suspects for money worries, sometimes a lack of organisation in your financial affairs can bring unwarranted concern. Uncertainty about the true state of your finances can lead you to be overly fearful about your financial future.

Accept the possibility of risk

Life has no guarantees, and it’s important to recognise that your plans may not end up in the way that you wish. We all have to face financial risk, which is the uncertainty of an event occurring that could have a negative impact on our goals, or put us in an adverse position financially.

It’s natural to fear the unknown, but there are steps you can take to deal with any eventuality that life may bring. If you know how to prepare for the worst, you can be mentally liberated to expect the best that life has to offer. Let’s look at some of the elements of a money-risk mitigation plan.

Save for maintenance expenses

One of the benefits of making a detailed budget is that it forces you to consider some undesired costs that could occur, such as buying large vehicle parts or making small repairs to your home. Although you would rather not deal with them, you need to put aside funds just in case they crop up.

Using the personal budget that can be downloaded at www.financiallysmart.org, estimate an annual amount that you may have to pay for these maintenance costs. Divide this figure by 12 to give you the amount that you should save in a ‘self-insurance’ fund every month for these eventualities.

Build an emergency fund

While you may be able to juggle your bills to cover small, unexpected costs that may arise, your finances would be seriously dislocated if you had to deal with a natural disaster or extended job loss. It’s important to build up an adequate stash of cash that could be used in case of major problems.

Your first savings goal should be to put aside at least three to six months’ worth of the basic expenses that you really can’t live without. It may take a while to get to your target, but you will gain peace of mind knowing that you have an emergency source of funds if the need arises.

Plan for health issues

Most people don’t want to think about getting sick or being unable to function normally. However, when it comes to your finances, it’s not wise to be overly optimistic about your health. Sickness and minor accidents can make a major dent in your budget and derail your progress towards your goals.

If you’re not part of a workplace health insurance plan that covers doctor’s visits, dental and optical care, or emergency hospitalisation, then you should consider the cost-effectiveness of purchasing an independent health plan. This is crucial if you have a dependent spouse and young children.

Insure for major illnesses

Your savings may be able to help you to pay for small health needs, but a permanent disability or chronic illness could wipe you out financially. With the high costs of treating major ailments such as cancer, heart disease and strokes, you need to have an external source for the required funds.

Lifestyle diseases are on the rise, and it is absolutely essential for you to obtain a critical illness plan that will give you a lump sum upon the diagnosis of specific health conditions. You should also look at having major medical insurance that could pay for expensive surgery or medical treatments.

Prepare for your passing

While you’re working hard towards achieving your goals, don’t make the common mistake of assuming that you will always be around to see your plans to fruition. Your premature passing can put an untimely end to your efforts at taking care of your family or increasing your net worth.

Purchasing life insurance can help you to prepare for the possibility of early loss of life; it will supply a lump sum to your survivors that can pay for funeral expenses, outstanding bills and keep your investments and estate secure. It’s best to discuss your insurance needs with a professional advisor.

Don’t be like the proverbial monkeys that see, hear and speak no evil, by thinking that life will always run smoothly. Challenges may come, but you can confront the negative possibilities with a practical protection plan that can give you peace of mind with your money.

Copyright © 2013 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, June 13, 2013

DON’T MISS MY NEXT ARTICLE! CLICK BELOW TO RECEIVE IT IN YOUR EMAIL:

Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl