Building a safety net for your finances is an important part of planning for your own money. Once you have a handle on your day-to-day finances and have thought about your long-term financial goals, you are in the best position to build a safety net. This can help make sure that financial disasters don’t mess up your financial goals or security. Find out why it’s important to have a safety net and how to make one by reading on. 

Photo by Joslyn Pickens

Start Small

Even though having enough money saved to cover three to six months of expenses seems like a lot, remember that it’s an end goal to work towards – you don’t have to do everything at once (and no one would expect you to either.

The reality is that even small amounts add up over time, and before you know it, you’ll be much further along than you thought. The key is to keep going and always save what you can when you can. A few dollars here and then could become quite a pleasant surprise when you look at your account. 

Invest – But Research First

It might sound risky to suggest that in order to build a financial safety net you should invest. After all, investments are inherently dangerous because, even if you see a lot of positive news about whatever it is you’re investing in, even a small change can cause the entire thing to fall down. 

However, investment is still a good idea if you’re careful, and it can provide a comfortable safety net within your finances. You need to do plenty of research before you commit to anything. In this way, you’ll spot things like the DiversyFund lawsuit, giving you the chance to decide whether it’s a good option for you or not. 

It’s also crucial to invest in a few different things at once rather than to put all your money into one investment. This is called diversifying your assets, and even if one investment fails, you won’t lose everything. 

Get Life Insurance 

If you have people who depend on you financially and would lose money if you died, you may need life insurance as a safety net. Most of the time, a child or a spouse is a dependent, and they are the ones you’ll need to think about, even though life insurance is not always a comfortable issue to discuss. 

Think about what your family would do if you died. How would they pay the rent or buy food? Life insurance is the best way to protect your family’s finances in case you die, and they lose your source of income. It’s the ultimate financial safety net.

Do A Financial Spring Clean 

Evaluate your income and expenses to identify where you could make reductions or consolidations. Figure out where you’re spending the most money each week so you know where to cut back. You might be surprised at all the things you’re paying for that you don’t actually need, and how much it all adds up to every month. Take that month and put it into a savings account as you won’t miss it in your day-to-day life, and build up a great safety net or emergency fund in that way.