From June to November, many in Jamaica keep an anxious watch for signs of an impending storm. During the months of the annual hurricane season, we are more likely to see these dangerous weather systems developing in the tropical waters which surround our island.

If one of the ominous cloud formations appears to be drifting in Jamaica’s direction, people often think about preparing for the possible arrival of heavy rains and wind. However, if we are spared the onslaught of bad weather, some persons will simply abandon their plans until the next scare.

The reality is that we are always faced with the potential of an emergency occurring at any time. As our Jamaican proverb of the week states, “Trouble nuh set like rain.” While a downpour is always preceded by gathering dark clouds, a major calamity can take place in your life without warning.

Although you can never be sure when a disastrous situation may strike, if you are prudent and proactive in your planning, you can lessen the negative effects of life’s unpleasant eventualities. Let’s take a look at some ways in which you can prepare financially for an uncertain future.

Assessing your vulnerable areas

First, you need to determine all the areas in your life which could be thrown into disarray by some undesirable occurrence. You are not being pessimistic and paranoid by visualising the terrible things that could happen to you; thinking of the worst will actually help you to plan for the best.

When considering the financial risks that you could face, ask yourself these questions: “What circumstances could prevent me from having the cash flow to meet my current and future needs?” and “What situations could cause me to lose the money and assets that I already have?”

Vulnerable areas for your finances may include your sources of income, your physical property, savings and investments, and your health and well-being. Once you are clear how you and your family could be exposed to harm, then you can make arrangements to mitigate these problems.

If your financial position is secure or if you have external means to protect your finances, you can usually recover from most emergencies. Therefore, you need to examine the weaknesses in your money situation and try to strengthen your defence mechanisms to face the possible attacks of life.

Preparing for loss of income

Whether you have a job, are self-employed or own a business, you need to have a back-up plan in the event that your earning source is compromised. While you may juggle your bills to cover small variations in income, it’s vital to create an emergency savings fund to cover extended income loss.

Although it may be difficult in this economy, your goal is to amass three to six months’ worth of the basic living expenses as outlined in your budget. Save every month into a ‘rainy-day’ account until you have reached your target, and don’t use these funds for anything but a genuine emergency.

If you work for someone else, look at ways of earning extra income outside of your nine-to-five. This will help you to be less vulnerable to job layoffs or decreases in your required income level, and it can also set the stage for you to create your own business in the future, if you desire.

If you are already working for yourself, your aim should be to have your major earning source obtained from a passive income stream. This will allow you to generate money with minimal physical effort after you have created the initial framework, and minimise your risk of income loss.

Preventing the loss of assets

Some of your earnings should be directed into saving to build a nest egg and investing to purchase assets. Since these financial choices can help you obtain an income without physically working for the money, your savings and investments also need to be protected from undesirable losses.

Your savings may be depleted by banking charges, fraudulent activity or theft. Look for savings accounts without deposit or withdrawal fees and tailor the use of your account to avoid penalties. Doing online transactions may help to reduce costs and allow you to track unauthorised activity.

If you have invested in physical assets, it makes sense to keep them in good repair to maintain their value and avoid costly replacement charges or renovation bills. It is also prudent to buy general insurance to cover the full replacement cost of your valuable physical property.

Very often, people lose money because of the unwise choices they make in their investments. Your first line of protection is to educate yourself about the process of investing and the various risks associated with different types of investments, so that you can make informed decisions.

With vigilance, you can minimise the risks to your income sources and assets. However, the loss of your health and well-being is a challenge that may be a little harder to control. Next week, we will look at some strategies that can help you to mitigate the financial effects of health emergencies.

Copyright © 2015 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, October 8, 2015.

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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