It can be quite the skill to dodge financial curveballs in business and personal life, and it can save you a lot of stress. With some savvy moves and a proactive approach to funds, you can learn how. From building an emergency fund to diversifying your income, here are some ideas.
Understand Savings Account Rules
Sometimes you can set aside funds for goals that aren’t met or plans that never materialize. Commonly, long-term funding plans involve savings plans such as ISAs and even RESPs for education. But what happens if RESP is unused or you access a savings plan early? There are generally pretty strict rules around accessing these funds, but knowing what they are and what they mean can help with short-term goals and get you back on track when priorities shift.
Build an Adequate Emergency Fund
An emergency fund can be the difference between an absolute disaster and recovering quickly. Whether it’s a family tragedy or a business deal gone bad, anything can happen that can cost a lot of money. Insurance is one thing, but it isn’t always a guarantee of recovering cash. And even if insurance pays out, it is unlikely to be the full required amount. It is recommended that an emergency fund be large enough for between three and six months’ worth of expenses.
Dodge Financial Curveballs with a Flexible Budget
It is recommended that you review cash flow on a weekly or monthly basis instead of annually. Whether it’s for a cost analysis of business relocation or a family vacation, knowing where you stand financially has practical implications you can use. So, stay flexible and on top of funds:
- Track income and expenses to identify areas where you can cut back on spending.
- Use a strategy such as 50/30/20 for needs, wants, and savings respectively.
- Regularly review cash flow so you can identify opportunities for optimization.
Diversify Streams of Income
It’s easy to say just make more money, but it’s not so easy in practice. Of course, there are countless ways a business or individual can earn extra income. It’s all a matter of identifying how and the best ways to do it without disrupting primary responsibilities. As an individual, something like a side hustle can be a lifeline that can even turn into a passionate business. On the business side, expanding offerings and market penetration can be a game-changer.
Assess and Manage Potential Risk
Risk management is an industry unto itself as modern enterprises of all sizes look to meet ESG quotas and reduce the potential penalties for non-compliance. Personally, insurance is the best way to manage risk and financial shocks. However, businesses can conduct regular risk assessments. A comprehensive plan that details risks to operations and the potential outcomes is recommended for company continuity, avoiding liability issues, and business interruption.
Summary
Understanding the rules around savings accounts and programs will help you dodge financial curveballs in business and life. A flexible budget allows you to stay ahead of the game, while assessing risk can identify the biggest threats to your personal life and business operations.
