A threat of a recession looms in 2023, according to experts. And in this uncertain economic climate, protecting your income has become more important than ever. Whether you are a salaried employee or a self-employed entrepreneur, losing your source of income can devastate your financial stability. Fortunately, there are several strategies you can employ to protect yourself against unexpected events like job loss, illness, or a recession. So, do you want to take control of your financial future? Here are eight strategies you can use to protect your income.
Know and prepare for the potential risks
As part of your financial planning and monthly budgeting, identify or consider all potential hypothetical scenarios that can cause financial instability. Think about everything that could go wrong in your financial life and how best to correct them. Create a plan should you lose your income or in case it is greatly reduced, and outline the potential short and long-term consequences. After doing this, determine what steps you can take to secure or restore your financial health. You can speak with a financial advisor to help you at this stage.
Don’t rely on the government for financial assistance
Many people expect their governments to provide financial assistance during economic instability. In the US, for example, many people received financial assistance from the government to help cover living expenses while they remained stuck at home due to COVID restrictions. While these expectations make sense, the last thing you want to do is place all your financial eggs in one basket, as there is no guarantee that the government will come through for you. Instead, look for other ways to secure your financial health. For example, consider spending below your means, saving for the future with an emergency fund, etc.
Consider income protection insurance
Income protection insurance is created to replace a percentage of your regular income in case sickness or injury makes it impossible for you to work for an extended period. This insurance can cover your daily living expenses while you focus on your recovery process.
Different insurance providers offer varying levels of income protection, so you need to speak with your employer to find the best policy for you. While income protection insurance isn’t a long-term financial security, it does offer some level of income stability to protect you during an uncertain period.
Start investing in your retirement
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It is never too early to start investing in your retirement, as you can never be too certain about the longevity of your career. Regardless of the field or industry you find yourself in, injury and any other form of health concern can force you into early retirement, severing your source of regular monthly income. Start investing in your retirement as soon as possible to ensure that no unforeseen event drowns you in financial uncertainty. Your retirement savings can provide a source of income in your later years and help you maintain your living standard after you stop working. If you’re already contributing to your retirement savings, consider increasing how much you contribute. Of course, only do this if the increment will not affect your financial status.
Develop marketable skills
The job market is evolving rapidly, and you must keep your skills current to stay relevant and employable. Take the time to develop marketable skills that will prove relevant no matter the changes in the general job market. It doesn’t matter whether you’re an employee or run your own business; such skills will help you create a steady source of income during an uncertain economic period. By developing skills in demand, you can increase your earning potential and reduce the risk of job loss. You can take courses or attend workshops to learn or improve new skills. And this leads to the next point.
Protect your intellectual property
If you’re self-employed or own a business, you should protect your intellectual property. Trademarks, patents, copyrights, models, etc., will need protection if they fall into the wrong hands. Doing this can help you maintain a competitive advantage and protect your income from infringement or theft by others, so feel free to consider this.
Find ways to secure your career
Try networking and building relationships with colleagues and industry professionals to help you stay informed about opportunities and trends. This way, you wouldn’t miss new opportunities when they show up. And even if you’re not actively hunting for a new job, keep your resume up-to-date to help you stay prepared for unexpected job loss or other changes in your employment status. Doing this will also help you identify areas where you can improve your skills and increase your earning. This may boost your job security and position you for long-term success, regardless of unforeseen situations, so feel free to consider this.
Moreover, it can help you recession proof your career. You should also have a strong work ethic, demonstrate reliability, and exceed expectations in your job. Think about pursuing certifications or additional courses to enhance your qualifications. And don’t be afraid to open up new challenges and opportunities while remaining adaptable to changes in your industry.
Diversify your income streams
Diversifying your income streams is another effective way to protect your income. It means creating multiple income sources outside of your main job or career. Income stream diversification is one of the most reliable ways to support or protect your career or business. If anything unexpected happens, you can rest assured that you have alternative income sources to fall back on. In other words, by diversifying your income, you can end your reliance on a single source of revenue, making you vulnerable to economic downturns or job loss. For instance, if you lose your job, having a rental income or e-commerce business can help you to stay afloat until you find a new job. You can also capitalize on your skills by starting a side job. In some cases, diversifying your income will free you from the burden of searching for a new job.
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