Financial decisions involve risks! “I don’t want to think about risks because I might attract them!”. This is how some people think about problems, obstacles that may arise in the way of achieving financial goals. They believe that the more often they think about things that will thwart their plans, the more likely those obstacles will happen, preventing them from achieving their goals.
Brian Tracy in his book: “The Key to Financial Success Is Within You” stated that things are exactly the opposite of what most people think. The more you focus on the risks, the obstacles that you may encounter on the way to achieving your financial goals, the more inventive you become, you use your mind’s resources; resources that may have been unused until then, ultimately finding many more solutions to prevent obstacles, risks than if you hadn’t thought about them.
How are these risks related to financial decisions?
Let’s say you want to move into your own home. You didn’t receive any inheritance and because you don’t have much money saved, the option at this point is to take out a loan. You make the minimum down payment and get your home. The home that you pay for for 30 years. If you are a good payer for 30 years and repay the monthly installment every month, over the 30 years, the home will remain yours, but if you don’t repay the amount borrowed over the course of the 30 years, the home you will temporarily live in will remain the bank’s. What are the risks? The risks that can arise in 30 years are: job loss, health problems, fire, divorce (if you are married at the time of contracting the loan), etc.
Let’s see how these problems can influence the objective: your home!
Losing your job becomes a problem from the perspective of the fact that the income needed to pay the housing installment disappears. Therefore, there is insurance that compensates for this risk. That insurance ensures the lack of inactivity for a short period, namely a few months. But this risk can extend over a longer period. Having a loan you have to accept a job, whatever it is, because the insurance expires; “my opportunity to keep the home expires”. Having money saved, then you don’t have to look for a job quickly, to be forced to accept any job. Would you like to have this freedom? Would you like to choose yourself, instead of someone else choosing for you?
There is another risk: losing your health for a period; a period in which income decreases, and the remaining income is directed towards recovery, medical services. If you are a lucky case and have health insurance that pays for all your medical services, then let’s say your income is enough to pay the installments.
Why do we need to have health insurance? You don’t have to, but you need to have money saved up to pay the mortgage and solve your health problems.
Should I get insurance?
If you consider it necessary, you can get health insurance for your protection. You can choose to put money aside for possible health problems or you can get health insurance. Each has its own risk. Reserves: if you have a problem that exceeds the amount collected, you cannot solve your problem. Insurance: if you don’t meet it, then that money is paid; you paid it for your financial and psychological protection.
Insurance: advantages and disadvantages
Insurance takes the place of reserves. If you have insurance, you pay every month to give the risk to a company. The company takes it over and you end up paying less than you would receive in the event of an unfortunate event: illness or accident. On the other hand, if the insured risk did not happen, then you will not receive the allocated money.
In the case of reserves, if the health problem arose earlier than the moment you would have collected the money, you assume the risk that you do not have all the money to be treated.
There can be several problems with health, such as the occurrence of serious illnesses.
Is it good to think about risks? Is it good to protect ourselves financially from problems that may arise? Do we need to have money saved?
What other risks can arise?
A fire, theft, divorce. How do we divide the installments, money, credit in the event of a divorce?
Having money saved, you can give your partner the money and have the freedom of a peaceful, happy life.
You have financial freedom, you have multiple possibilities. When you don’t have money, the possibilities are limited.
Why do you think the expression: “the rat race”, which Robert Kiosayi expressed, is used? Because if we don’t have money, we function exactly like a rat. A rat only deals with walking on a wheel, constantly doing the same action: walking on a wheel, when it gets tired it eats to gain energy to start over. A man without financial reserves, without money saved, goes to work to earn the salary necessary to pay his installments, to pay the utilities, remains without money at the end of the month and needs to go back and forth again to pay all the utilities. God forbid that any of the above-mentioned nonsense happens!
You can read more about risk here: https://laurentiumihai.ro/investitiile-si-riscul/
Financial decisions involve risks!
Are there other problems that may arise? Think about them because by thinking about them you find solutions to protect yourself. Don’t be afraid that you will attract them! This way you find solutions to protect yourself and your family. It is better to think about them and if they arise, you can easily solve them. But if you do nothing and just think about them; they come, it does not mean that you have attracted them, but that you have done nothing to protect yourself; yourself and those involved in that situation. Usually more people are involved, the peace and security of more people is lost.
Once you have money to solve the problematic situations that arise, you get used to the reserves and you can even continue to save money. If no problematic situations arise and you have reserves, you can end up in a position to close the loan early. Closing the loan early gives you the freedom to close the agreement with the bank earlier than 30 years and not give the bank double.
Financial planning
Financial decisions involve risks! That is why there is planning. Financial planning is planning reserves. They are like the foundation of a house. It is the foundation on which something great is built.
Reserves include:
– emergency fund (for unforeseen situations such as: burst pipe in the house, breakdown of the stove, refrigerator, etc.)
Here an amount between 2,000 – 3,000 lei is needed. It matters a lot how much the goods in your house cost. If one costs 5,000 lei then your fund will be 5,000- 6,000 lei.
– financial security fund; a fund that includes monthly costs with monthly needs for 3-6-9-12 months.
Determine how much you pay monthly for all these monthly needs, such as: property maintenance, installments (if you have made them, you need to pay them), food, telecommunications, etc. We will remove from this category: vacations, outings, events; all entertainment expenses.
This fund helps you overcome moments such as: reduced income, job loss or health problems.
You can call for a financial planning session here: https://www.psihologiabanilor.ro/planificare-financiara/
Success in becoming aware of (the dangers of) money!
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