When it comes to financial risk, there is a probability that you can go to bed thinking you are financially secure and wake up effectively broke. Even on the best of days, before you get out of bed in the morning your financial security is at risk.
There are only two parts to financial security. The first is accumulating after tax dollars for future investment. The second is reducing or eliminating the risk of those investments being taken away.
This year is already shaping up as being unpredictable and unstable. When both the macro and micro economic forces in play can conservatively said to be, at best, unpredictable, it is reasonable to come to the conclusion that there is substantial monetary risk.
What this means is that it's going to be hard to make money in 2015 and even harder to keep it.
I quite agree that where there is volatility there are opportunities to gain. But under these circumstances the potential risk for losses is equal, if not greater, than that of gains.
There are, however, four steps you can take to reduce your risk of financial losses.
Do a civil liability audit of your personal, business and investment life.
Remember the saying attributed to Socrates that an unexamined life is not a life worth living? While Socrates was certainly speaking to transcending instinctive decisions to focus on conscious and ethical choices, this same thought applies to making deliberate and intentional choices in recognizing and dealing with risk.
This type of audit should be done in coordination with your trusted advisors. Lawyers, accountants, money managers, insurance consultants and bankers are good sources to provide you with their view of where you might get hit with a costly loss.
Many times I use a cheat sheet of sorts in trying to sort out these things. That is, I start with a list of all possible legal causes of action that could be filed as part of a civil lawsuit and then see if any of them could be applicable to a client's particular personal, business or investment life.
The other professional advisors each have their own methods of looking at your messy and, to some extent, dysfunctional life to evaluate where things could expose you to the risk of liability in a civil lawsuit.
Do an analysis of your exposure to government regulations.
There are hundreds of thousands of regulations in existence already, with federal, state, county and city departments, bureaus and agencies promulgating more every day. Along with formal regulations are temporary regulations, proposed regulations, guidance, notices, memos and a whole host of other off-the-radar procedures, protocols, rules and guidelines that you are held liable to follow.
Think of this as a voyage of discovery. It is typical that the first time someone becomes aware of some applicable government regulation is when the enforcement letter arrives. If you want to avoid or at the least tamp down the potential for having your personal, business or investment life turned upside down and inside out, it is imperative that you at least become aware of where the government intends to attack you. Then, armed with that knowledge, you can get your professionals to prepare your defenses while you still have control on how you will defend yourself.
Make a lifestyle and business cash flow analysis.
There are a plethora of truisms regarding cash. Cash is king. The lifeblood of business is cash flow. And one of my favorites, happiness is a positive cash flow.
Cash flow goes to the heart of the matter when it comes to financial security.
From a wealth protection point of view, the critical part of asset protection planning is protecting the ability to keep on paying for the defense.
It is critical to understand the sources of cash and likely future uses of your cash. While it is normal for most people to have a business budget and have their financial professionals prepare projected cash flow analysis, not many also take the time to do the same as to their lifestyle.
One thing about economic volatility is that when it goes the wrong way, it becomes very costly very quickly. Without knowing what resources can be drawn on quickly when needed, this can easily become a disaster rather than just an anxious time that can be handled.
Create a plan to protect your assets.
The old saying "Plan for success" has proven to be true time and time again. History tells us that the winning generals have eventually won the war because they plan their defenses first.
Think of your risk for taking losses as a war. Who will be your general?
Many people use a wealth protection specialist to coordinate with their regular professionals to develop an overall plan to meet your protective objectives and priorities.
When is the best time during 2015 to make these moves to protect your hard-earned wealth?
Waiting for the perfect time to engage in making the effort to protect your assets is foolish. There will never be a perfect time. In the meantime, the probability of unexpected, unintended or unforeseen losses doesn't go away just because your ignored it. The best time to plan is now.
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