Disclaimer: All the information provided in this article is for informational purposes only. It is not meant to be financial advice. Seek a duly licensed professional for financial advice.
Statistics from the American Bankruptcy Institute show that 20% of bankruptcy filers had a college degree, 29% of them had some form of college education, and 36% of them were high school graduates. It means that it is not only uneducated people who go broke, quite often educated people go broke as well.
In the capitalistic society that we live in today, we must learn how to manage our money, because as we have already seen, even educated people are prone to become bankrupt. We need to learn how to keep our money safe to be financially secure all the time. Here are a few ways to keep your money safe and avoid financial disasters in the future.
Build an emergency fund
Deposit money into a particular fund which you will use only during times of emergency. Doing that can be helpful for you in the future. For example, if you have a sudden illness or an accident which requires a vast amount of money for treatment, you would have to take loans for it to pay the medical bill. A study published in the American Journal of Public Health in 2019 found that two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall.
Sometimes, people's medical loans are so big that they spend an entire lifetime repaying those loans. This is why building an emergency fund is helpful. It can help a lot in taking less amount of loan or not taking it at all. Emergency funds can also help a lot during times of emergency crises.
Get some insurance
Life insurance protects your family financially in case of death. Medical insurance protects your family against medical risks. Financial advisors recommend that your insurance amount should be 10 or 15 times your annual income, for the sake of being secure.
Credit cards make a lot of people fall into debt traps. This is because the interest rates charged for credit card bill repayments are very high. Since credit cards increase the purchasing power of people, a lot of reckless spenders spend more than what they can afford. For this reason, financial advisors recommend using credit cards only for planned expenses and in case of emergencies.
Track your spending
When you start tracking your spending, you will notice those transactions that made you spend your money for unnecessary purposes. Whenever you notice those unnecessary spending that you made and decide to avoid them, you'll end up saving a lot of money from getting spent on unnecessary things.
As Warren Buffet has said, "Predicting rains doesn't count, building arks does." A financial downfall in your life is like the weather, you can't argue with it. But what you can do is prepare yourselves by investing and saving adequately so that you never face any financial downfalls in your life.