Life is not meant to be boring. It is for living to the full, making the most of opportunities and taking a few risks along the way. A financial safety net to protect you when things go wrong is a key part of creating and preserving wealth.
The degree of risk you can take changes with age and accordingly the size of the safety net you need increases. Young people have little accumulated and not much to lose, but they also have the potential to make big gains through taking risk. Those near the end of their working life have a lot to lose and little to gain from risky ventures and so their safety net needs to be bigger.
There are a number of ways you can create a safety net. Start by building up a slush fund, preferably tucked away in an account that is not visible on your internet banking so you are not tempted to spend it.Insurance also forms part of your safety net. In addition to insuring your property and your life, consider whether you should insure your income. Your future earnings are possibly your biggest financial asset and need protection. Don’t put all your available funds into risky business ventures; have some of your wealth in safe investments as a fall-back. If you are borrowing money or taking any kind of financial risk, make sure your wealth is protected with all the necessary legal structures and documentation relevant to your situation, such as a limited liability company, a trust or a contracting out agreement.
Along with risk comes the possibility of increased wealth and enjoyment of life. A financial safety net allows you to make the most of possibilities without the fear of a hard landing if things don’t go according to plan.
