Protecting Money & Managing Risk: The Big Picture (17th Blog Post)

When we become adults, lots of unexpected expenses can be expected. As we discussed in our 9th blog post (“Saving & Investing: Why It is Important to Save Money If at All Possible”), they may involve financial emergencies, they may involve expenses that are not emergency-related, or they may involve some combination of the two. To successfully manage through periods in our lives when unexpected expenses arise, we will need to protect the money that we earn. That means spending the money that we earn wisely, making smart financial decisions including about things like personal debt and insurance, and saving money if and when possible.

Again, what are realistic examples of financial emergencies?

How about the loss of one’s job and the loss of income that goes along with it. You still will be on the hook to pay your rent. You still will be on the hook to pay your utilities bill. You still will have to buy groceries.

How about an unexpected medical problem? Let’s say you get seriously sick or a loved one gets seriously sick. Let’s say you get into an accident or a loved one gets into an accident. Sure, health insurance may help cover some of these associated costs. But health insurance won’t cover the loss of income that potentially may result from such events. And health insurance has its limits. What I mean by this is people usually have to pay out-of-pocket for some portion of their healthcare expenses even if they have health insurance. Moreover, health insurance plans may not cover an individual procedure and may impose limits on reimbursable coverage.

How about an expensive home repair? Let’s say a leaky pipe or a frozen pipe or a toilet that overflows or a mold problem or damage to your home caused by a natural disaster like a fire, flood or hurricane. Fixing such problems is not inexpensive. And once again, even if you have renters insurance or homeowners insurance, insurance plans have their limits and those whose homes are insured may still have to pay out-of-pocket for some portion of their home repair expenses.

How about an expensive automotive repair? Perhaps you or a loved one got into an accident. Or perhaps there was no accident at all but something happened to your vehicle and it requires a professional fix. Sure, auto insurance should help, but just because you have auto insurance does not necessarily mean that you will not have to pay some portion of the cost of repair out of your own pocket.

How about an emergency involving your pet?

By the way, even when an insurer covers an expense, you may have to lay out the cash initially to cover that expense in its entirety and then wait some period of time for the insurer to partially or fully reimburse you.

What are realistic examples of unexpected expenses that are not emergency-related?

How about the cost of repairing or replacing a home appliance that is no longer working?

How about you lost something you need, or a loved one lost something they need, and you now have to replace it?

How about some activity that you or a loved one had not planned to participate in but now wish to participate in?

How about new glasses?

How about the zippers of your bag or of your child’s knapsack no longer work and you need to replace the bag or knapsack?

How about unplanned travel?

How about a bill from your pet’s veterinarian?

How about a gift that you suddenly have to give but had not planned for?

How about an increase in the amount of taxes you have to pay?

And yes, everything mentioned here thus far is entirely separate from just trying to achieve our personal financial goals, whatever those may be. Our ability when we become adults to protect our money and manage our personal financial risk, therefore, will ultimately be a critically important determinant of the success we have, or for that matter the success we do not have, in achieving our personal financial goals and achieving financial independence and financial stability in our lives. More on protecting money and managing our personal financial risk in our remaining set of blog posts.

I would love to hear from you. Any ideas, experiences, thoughts, comments and questions….please do share.

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