The post <strong>How to manage financial risk | Tips | Example</strong> appeared first on FINANCEHELPS.
]]>Hello readers! Here we will be discussing how to manage financial risk. Managing personal finance is one of the important things, because, if we can’t manage our funds properly then, there will be a financial risk in our life, which is difficult to manage. So earlier, we have to identify the personal financial risk for controlling and mitigating the risk level. Some common personal financial risks are given below;
Risk/ Issue | Potential Causes | Consequence |
Income risk | This may be due to disability, unemployment, aging, death, personal business down, etc. | Effect on P&L, Effect on liability, effect on wealth/ assets, etc. |
Expense risk | High expense, emergency expense, unwanted expense, etc. | |
Investment risk | Inflation, depreciation, destruction, risky investment, etc. | |
Debt risk | Bad debt, too much or unnecessary debt, etc. |
[Potential causes may vary from person to person]
If sometimes you are facing the above problems in your life then you are supposed to find out the significant causes considering all your factors and situations. After finding the significant causes you can take the adequate preparation to overcome the risks.
As all of you know that life is not a straight line, there are always up and down in life, so if you are planned and prepared yourself then you can easily control, manage, and reduce/mitigate your personal financial risks. From my own experience sharing here some common practices that you can properly manage your personal financial risks;
Risk/issue-1: Income Risk:
Risk/ Issue | Potential Causes |
Income risk | This may be due to disability, unemployment, aging, death, personal business down, etc. |
Here I am sharing my own experience on how I’m managing income-related risk and these practices are given below;
Risk/ Issue | Potential Causes |
Expense risk | High expense, emergency expense, unwanted expense, etc. |
The best ways that I personally follow for managing my expense-related risks are;
Risk/ Issue | Potential Causes |
Investment risk | Inflation, depreciation, destruction, risky investment, etc. |
A proper Investment may make your financial health or freedom. So we can plan our investment before doing the appropriate risk analysis, all investments have a certain level of risks like high risk, medium risk, and low risk. According to your risk factor, we can invest our money in the long term or short term. I always try to diversify my investment so that I can get the maximum benefits. Below are some common ways of investments that I follow
Proper investments not only give you financial freedom/healthy but also help you related to inflation, depreciation, etc.
Risk/ Issue | Potential Causes |
Debt risk | Bad debt, too much or unnecessary debt, etc. |
Always try to keep your debt to a minimum. I personally follow the below steps to manage debt risk as;
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Hi, I’m SG. Pradhan, the author & owner of the website “financehelps.in”. My expertise is in Financial Management & Accounting, Quality Management, Operation Management, Business Excellence, and Process Excellence. I am mech. engg. & certified internal and lead auditor.
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