How to Prepare Yourself Financially for Future Uncertainties
One thing is certain—we can never truly know what will happen tomorrow. Life’s uncertainties don’t happen that often but when they do, it could hit you like a truck especially financially. To prepare for this, you must look ahead of the road so you can minimize the damage these trucks bring.
Looking ahead of the road means preparing for the worst to come; and preparing means you have to lay out a plan. You might confidently say: “Well, I’m prepared for the future because I have lots of cash on my account!” You are wrong. While saving helps a lot, it’s just a part of the equation. You will need protection and more income streams to future-proof any economic and personal uncertainty. It always pays to be financially prepared.
If you don’t know where to start, here are some tips on how to prepare yourself financially for future uncertainties:
Build your Emergency Fund
Start by having a backup. An emergency fund is a source of funds that you can tap into when your main source of income is suddenly cut. This serves as your financial buffer for unexpected events in your life such as unemployment, medical expenses, home repairs, car repairs, and other emergencies. Having this cushion frees you from debt and worry and ensures that you could still follow your financial plans.
The amount that you need to build an emergency fund depends on you. We recommend saving 6 months to a year worth of salary.
Read more: How to start and build an Emergency Fund
The question now is where should you put it. The safest place you could park it is in a bank account. A good idea would be to open an account that would give you the freedom to choose your saving goals while giving you easy access to your funds—just in case you need them for emergencies. Not only will you have the assurance that your money is safe as opposed to having them stored in a physical location, but there’s also a chance for your money to grow once it reaches the amount where it can earn interest.
Find ways to increase your income
Another thing that can help you prepare for future uncertainties is to increase your income. Saving is just half of the battle. As inflation goes higher each year, you need to find ways to boost your income—whether it be finding a sideline job, asking for a promotion, or starting a business.
Having multiple sources of income will become vital in future financial uncertainties because you’re not depending on one source alone. For example: When things go awry in your main job, you have your business or a sideline job as a backup source of income—and vice versa.
Plan your expenses
Another helpful tip is to plan your expenses wisely. Now, this doesn’t exactly mean living like a monk and cutting your expenses drastically but rather, tracking your spending so you can plan better. It pays to track your expenses so you know how much and where your money is going.
You can start by making a list of things you need and a record of your daily expenses. Identify which expenses are going to your needs, wants, and savings. If your expenses are tilting heavily towards wants, we recommend that you reduce it so more will be allocated to your needs and savings. Have a good budget plan and stick to it.
A good balance for budgeting would look like this:
- 50% for your needs
- 30% for your wants
- 20% for savings
If you have a credit card, take advantage of the points you earn and the various discounts you get from promos. Also, there’s a lot of cashback options that you can get so keep that in mind when purchasing.
Get coverage or protection
When you have dependents, we recommend that you get an insurance. After all, in uncertain times, the last thing you want is to deplete all your hard-earned savings on medical or death expenses.
Insurance is important. However, many people are still hesitant to get one because of main reasons such as (a.) the associated cost of getting one and (b.) thinking that it’s too early to get one.
The first reason is understandable, especially when you find yourself strapped for cash. However, think of the possibilities that can happen to you in the future. What if something happens to you (knock on wood!), an accident, sickness, or even death—you don’t want your dependents to catch all the burden of paying it. Just imagine the costs associated with when you don’t have insurance. Furthermore, there are lots of affordable insurance plans out there. Starting at P1,000-P2,000 per year, you can get good life insurance coverage already.
If you’re still on the fence about getting insurance, why not try opening a savings and checking account in one that comes with free life insurance—our All Access Account.
Make your money grow with investments
Now that you’ve already built up your emergency fund and get insurance protection, it’s time to grow your money exponentially through investments and not just earn interest from your savings account.
First, you need to determine what’s your risk appetite. If you’re a beginner or a conservative investor, you may want to park your money in a low-risk investment vehicle. You can explore fixed income securities as these will give you fixed source of income over time with the face amount invested returned to you upon the end of the term, regardless of changes in current market performance. You can enjoy the benefits of having a stable source of passive income with minimal risk.
If you’re an aggressive investor, you may want to invest in stocks as these potentially offer higher returns than bonds and high-interest savings account. However, you need to keep in mind that the stock market is a highly volatile market. Thus, there’s a chance that you will lose your money here.
Take your banking online
Over the years, we lean on online transactions more than ever. Doing transactions online has proven to be more convenient and safer than going out (due to the pandemic). In a highly-digitized society such as ours, online and cashless transactions have become the staple in today’s e-commerce.
If you’re not using online banking yet, we recommend that you take your banking online. Things that you can do in branches like Paying Bills, Paying Contributions, and Sending Money among others can now be done online with the added convenience and accessibility!