Whether you realize it or not you constantly face the risk of losing your
hard earned money the bad news is the risks
will not stop but the good news is there are simple ways for you to solve
these problems and in this video you will learn the three
biggest risks to your money and what to do about them and if you're new to the
channel then hit the subscribe button below for
more life changing content risk number one income risk income risk
has to do with losing your source of income such as your job or your business
your most vital asset is human capital this is the economist term that refers
to your capacity to earn money for you to successfully manage your
money you simply have to possess some money in the first place
this means your first financial goal should be to generate as much money
as you can since economists believe that human capital is the biggest asset you
can possess then this income risk is your biggest
financial risk so what can you do about this just keep
watching i'll elaborate later in this video
to mitigate income risk you simply have to focus on developing
and improving skills that can make you more money it's entirely possible to
feel like there aren't a lot of opportunities in this world however
that's simply not true the ways in which you can make more money are
infinite one method that's worth your consideration is establishing a scalable
side hustle by scalable i mean that the side
hustle's earning potential should be limitless
although you probably aren't guaranteed to make any profits at first
for example if you developed a skill in writing and improve yourself through
endless reading and practice you could begin working as a freelance
writer with that to supplement your regular 9 to 5 paycheck you can double
your income sooner than you'd imagine in no time you
may attain a level of abundance where your side hustle income is equal to your
paychecks with an income diversification such as
this one even if you happen to lose your job
the income from your side hustle could very easily cover your living expenses
now this forms another layer of managing your income risk thereby
reducing the possibility that you'll ever have to depend on your financial
capital for the rest of your working days
this implies your financial capital will keep compounding
and can comfortably support you during your retirement days
another way to handle this risk is to work on your savings rate
which i'll show you later in this video so stick around
maximizing your financial capital is a great method for supporting your human
capital losing your job without any money saved
up could usher you into a hellish world of financial damnation
conversely if you lost your job but have investments in savings that are enough
to last you another seven months or longer then
you'll have given yourself enough time to get back on your feet
with a higher savings rate you have increased your financial capital while
reducing the risk that a potential job loss may pose
to you if you're unfamiliar a savings rate is a percentage of a person's
paycheck that's saved for instance if you earned a thousand
dollars as take-home pay and save 200 that would be a 20 savings rate but how
can you increase your savings rate here you ask
there are two ways to do this first maintain a
constant income and reduce your expenses and second
maintain your current expenses and increase your income
reducing your monthly spending by a hundred dollars impacts your savings
rate in the same manner is when you increase your income by a hundred
dollars actually when you decrease your living
expenses it does you more good than when you increase your
income as it's more tax efficient if the marginal tax rate
is at 30 percent spending 500 less than your usual monthly expenses leads to a
theoretical increase in your monthly income
of 715 although you could achieve this by increasing your income spending a few
hours cutting down on unnecessary expenses
might prove less tasking you might think this is hard but
if you're ready to cut your spending i'd suggest taking a microscopic look
at your top three expenditures risk number two
hesitancy risk the second risk has to do with the fear of investing due to being
hesitant about losing money the last market crash is still fresh in
the minds of a lot of people and it can be quite hard to conquer your fears and
restart your investment plans but as they say if there's a will
there's a way and you already have the former because you're watching this
video so let's discuss the way many people are
successful today because they did not give up but
tried one more time shame is one of the things you must give up to be rich and
successful in life life as an investor can be quite
daunting the thought that you could possibly lose everything you've
struggled to build in a second is beyond paralyzing
then throw in the fact that the economy is as volatile as
ever and you've truly given yourself a good scare
bad or good economy investments such as the stock market will
always come with risks therefore if you give into fear you will simply be
passing up on some wonderful opportunities
and probably end up missing out on huge returns which would have your name on it
so like the old saying goes there is no
time like the present and presently there's no better opportunity for you to
get into the investment game than now simply consider the market
downturn in the same light as black friday sales wouldn't be smart to
shop when the prices are low knowing that soon they'll rise
part of the problem is that most people still think they have a choice
most people still cannot embrace the fact that investing
isn't optional let's take a look at the fears of many non-investors
the emotional fear of failure that says i'll look stupid if i fail
the rational fear of failure that says i cannot afford losing all my money
fear of people treating them like a fool fear of seeming ignorant when confronted
with unfamiliar subjects these are all valid and sensible however
you cannot let valid and sensible fears tie you down and deprive you
of the more sensible and valid pleasures of success
so what do you do firstly you should do your homework for the experience in
well-versed investors the investment terms are plain and natural however
to a newbie it might seem like well gibberish
also it can be very frustrating when those you go to for information
also use terms you don't understand a situation like this keeps outsiders out
and keeps the insiders in so to kickstart
your investment lessons you should get yourself some insightful books on the
subject matter you can visit investing sites to find
recommendations from experts you can also freely educate yourself on
the web one good investment site for you is investopedia
on such websites you'd find a glossary of investment terms covering over 8 000
items this will help you demystify those
mysterious investment terms and on these sites you can also find
many tips on investing that you can implement
into your own investing game plan another method is to devise a viable
plan for yourself before you start investing
settle yourself and write out your goals and the deadline for each be clear on
your reasons for investing and when you would want the money back
for example if you find that you'll need the money back within the following two
or four years preservation has to be your top aim as a
newly investor you should search for a safe and accessible investment vehicle
to put your money into you could check out instruments
like mutual funds or a bank certificate a deposit however do not forget that the
goal is to lock in your money for the long term
if you possess a small fortune that you want to invest but are scared to
you can start by taking small baby investment steps
this is done by investing little portions at intervals via dollar cost
averaging let's assume the entire sum you have is
twelve thousand dollars divide that by the time period you want
to invest over let's say it's twelve months
then you invest your twelve thousand dollars at the same time for twelve
months which equates to a thousand dollars per month
during a rising time in the market you will undoubtedly be buying a lesser
number of shares however in slower months
this same a thousand dollars will buy you more hence the approach of dollar
cost averaging this method of spreading your money over a time frame reduces the
risk of losing all your investments another step to
take is to ensure you diversify your portfolio
several investors commit the rookie error favoring the stock of a particular
company putting all their money in only one kind
of stock this is a bad move because in this uncertain world and uncertain
times if a terrible event was to happen to that company
you may damage your savings goal permanently investment vehicle like
mutual funds can provide the diversification you need as your
investment will go into multiple different stocks
the final step in countering your hesitancy risk is one bitter truth that
cannot be denied and it's a fact that you have to be
ready for losses the fact is everything will not run as planned therefore as an
investor a time will definitely come while you make some wrong moves so what
are your options against this just as i said earlier in this video you
have to learn as much as possible especially from your mistakes
learning from your past errors is even more valuable because knowing better
means you'll fare better in the long run risk number three longevity risk the
final risk to your money refers to the possibility of you
outliving your retirement savings most people in their retirement age cover
their living expenses by dipping into their financial capital
at this point your biggest financial dilemma is longevity risk which sees you
out living your savings and no longer having the means to cover your routine
expenses once you begin spending from your
financial capital the countdown to when you run out of money starts
the longevity risk is a scenario where you establish a financial plan that
would cater to your living expenses till you're 85 but
what happens if you live to be a hundred that means you live another 15 years
with no capital to maintain your lifestyle
so what can you do to prevent a situation like that i'll go into that
now years back when people could access a
pension through work longevity risk wasn't a big issue
unfortunately very few private sector workers can access a reliable and
lucrative pension now these days everyone relies on the money
they manage to save to cater to their retirement
saving for retirement is now a difficult task with a life expectancy on the rise
which means the number of retirement years has also increased
there are two options that i recommend to combat this the first
is ensuring you build up abundant financial capital capable of funding
your lifestyle all through your old age for instance
with 10 million dollars saved up for retirement
you could easily live off of 50 000 every year
in this case the odds that you outlive such a plan are literally
zero of course that example is extreme however you get the basic idea which
is to save as much as possible in order to have more than enough to sustain your
retirement days on the planet this option is not available to most
people since it demands a huge amount of savings yearly throughout your
pre-retirement however if your opportunity to be
capable of amassing such an amount of wealth
then you may as well forget about longevity risk now
as to the other solution we talked about earlier in this video although a pension
may not be relatively accessible to you you can buy one just before you retire
did i hear you ask what is he talking about well i'm
talking about you buying a product known as a
lifetime annuity this is a financial product that is provided via insurance
companies the lifetime annuity guarantees you a monthly income
till you leave this earth in this manner it serves the same purpose as a pension
to get this you'll have to hand over at least a
major part of all of your retirement savings however
it's permanent you know that annuities are complex and as expected do not come
cheap if you want to go along this option i suggest that you have a seat
with a fiduciary financial planner they'll break down the details for you
also remember everyone goes through at least one of these risks at some point
in their lives but if you follow the examples of those who
have succeeded before you you too can overcome all three of these
risks to your money thanks for watching if you
want to go from the life you have to the life you deserve
then hit the subscribe button now
you