Financial Threats You CAN Control

Earlier this month, the Economist Intelligence Unit updated its list of the Top Ten Global Threats. They are:

1. China experiences a hard landing
2. Currency volatility and persistent commodity prices weakness culminates in an emerging markets corpo
3. Donald Trump wins the US presidential election
4. Beset by external and internal pressures, the EU begins to fracture
5. "Grexit" is followed by a euro zone break-up
6. The rising threat of jihadi terrorism destabilizes the global economy
7. Global growth surges in 2017 as emerging markets rally
8. The UK votes to leave the EU
9. Chinese expansionism prompts a clash of arms in the South China Sea
10. A collapse in investment in the oil sector prompts a future oil price shock

While any one of these events could throw the world’s economy into a tailspin, they are out of our control, so it may be smarter to concentrate on the Top Ten Financial Threats that are within our ability to manage.

1. Ignoring your Cash Flow: It is hard to live within your means if you have no idea where the money is going. Regardless of your income level, the key to reaching your financial goals starts with a simple task: tracking your income and expenses.

2. Borrowing too much: Whether it’s for a house or for your child’s education, carrying too much debt can prevent you from addressing important financial goals and may also create a huge emotion burden.

3. Not establishing an emergency reserve fund: Bad luck can occur at any time, so it is vital to save an easily accessible, liquid cushion of 6 to 12 months of expenses if you are still working - 12 to 24 months if you are retired.

4. Carrying No/Insufficient Life Insurance Coverage: If you have dependents, prepare for the worst-case scenario by purchasing adequate life insurance coverage. In most cases, term life will do the job.

5. Not Contributing to Retirement as Early as Possible: Ask any retiree about the biggest mistake he or she made and it will likely be “I should have started saving sooner!” Establishing the automatic saving habit early pays huge dividends in the future.

6. Tapping Retirement Funds Early: While the IRS allows for hardship withdrawals in certain instances, too many workers who leave their jobs, cash out plan assets and pay a tax penalty, instead of rolling over the funds into another retirement account.

7. Failing to Properly and Efficiently Manage Retirement Funds: Whether it’s not rebalancing, owning too much company stock or using high-fee funds, retirement savers are costing themselves money with easy-to-rectify oversights.

8. Claiming Social Security Early: You can claim SS retirement benefits as early as age 62, but doing so will permanently reduce your (and your spouse's, if he or she plans to claim one-half of your benefit) monthly income by as much as 25 percent.

9. Not drafting a will/power of attorney/health care proxy: Don’t create a mess for your heirs-draft the necessary estate documents NOW.

10. Not Seeking Help When You Need It: There is no shame in admitting that you need help with your financial life. If you want customized services,work with a professional who has earned the CFP® certification or is a CPA Personal Financial Specialist. You can ask for referrals from friends or colleagues or use the search tools offered by the Certified Financial Planner Board of Standards, the Financial Planning Association, or for fee only advisors, go to the National Association of Personal Financial Advisors.