15 Biggest Threats to Your Financial Security

Have you ever felt like your financial security was walking a tightrope? It can feel like any small gust of wind, a sudden expense, a job hiccup, or an unexpected twist in life could throw everything out of balance. But what if you could see those gusts of wind coming and brace yourself? Knowing the biggest threats to your financial security can transform a bad surprise into a well-managed risk, and maybe, possibly, an unexpected opportunity.

Here are the 15 biggest threats to your financial security, starting off at number one with something many people have been faced with lately: job loss or unemployment. Losing a job is more than just an emotional roller coaster; it's a financial shock wave. It's not just about losing a source of income; it's also about managing the uncertainty of how long you'll be out of work. The impact extends beyond just you; it affects your entire household. This is why we're always going on and on about having the safety net of an emergency fund. It's why we're always talking about updating your hard skills and qualifications, and staying on top of your soft skills like networking. When stuff hits the fan, it's your professional network that's going to be your best savior in helping you get back into the workforce. Job loss is a common hurdle, and with the right preparation and response, it can be a temporary setback rather than a life sentence of financial struggle.

Number two: high levels of debt. Carrying a high amount of debt can feel like you're trying to run a marathon with a backpack full of rocks—it's exhausting and it slows you down. High-interest debt, like credit card balances, can be incredibly draining because it compounds quickly, and before you know it, it's outpaced your ability to pay it down. It's the kind of financial burden that can lead to a cycle of just paying off interest without reducing the principal amount. Every time you look at that statement, it's higher even though you've been paying it off. You've got to throw yourself off the hamster wheel to tackle this—look at strategies like debt consolidation and prioritize your debts with the highest interest rates for repayment, also known as the Avalanche method.

Number three: medical expenses. An unexpected medical issue can turn into a financial nightmare—especially if you're not properly insured. Medical debts can come from anything: a sudden illness, a serious accident, or a chronic condition requiring ongoing care. The costs for this can be staggering and often arrive unexpectedly, leaving you very little time to prepare. Paying for that monthly insurance amount sure can be annoying and seem wasteful when you're not using it, but when you do need it and you don't have it, the feeling goes from annoyance to panic and then despair. So which feeling would you rather deal with? You could also look at options like health savings accounts (HSAs) or flexible spending accounts (FSAs). Always double-check your medical bills for errors and fight like a barracuda for yourself, because nobody else is going to do it for you. You have to be meticulous and relentless with your bills, questioning everything and going for multiple opinions. And obviously, it's important to keep yourself as healthy as possible to potentially avoid some of these costs at all.

Number four: economic recession. You'll hear about an economic recession before you feel it, and you'll keep hearing about it, worrying and thinking it's not really affecting you until one day everything hits. Grocery bills creep up without you noticing, until one month your money disappears way quicker than normal. Then companies downsize, investments lose value, and job security becomes more uncertain. An economic recession can feel like a cold winter that affects everyone in some way. It can lead to decreased household income at a time when maintaining financial stability is more critical than ever. You have to scale back on everything until you're stable—swap the fancy grocery brands for the basic ones, the extravagant holidays for something more local, and just buy fewer things. Diversify your income sources and investments to give yourself some kind of cushion. Watch economic indicators to prepare and make adjustments to your finances. Recessions are challenging, but with good planning, you can work through them.

Number five: identity theft. If you've never been a victim of identity theft, then you don't know just how easy and common it is. Someone on the other side of the world doesn't have to steal your entire identity and dye their hair to match yours for it to affect you financially. We work from coffee shops, co-working spaces, and hotels without a second thought, but those networks are public. It's incredibly easy for hackers to steal your data when you're on a public network. But this doesn't mean you have to avoid working at coffee shops completely or avoid working and traveling if you've got that privilege. It is important for you to use extra security measures. NordVPN, the sponsor of today's video, is your ideal ally in protecting your data. NordVPN encrypts your internet traffic using advanced encryption protocols to keep your data, personal information, and online activities secure from hackers and cybercriminals. They also give you a secure connection even on public Wi-Fi. If you're going to be traveling this summer, even if it's just for your personal fun adventures, then Nord is going to be the best travel buddy—not just because they'll protect your data, but also because you'll get access to their new eSIM service. If you sign up at the link nordvpn.com/alux, you'll get four extra months on us and up to 20 GB of eSIM data. You protect your assets and finances, and protect your personal safety by making sure that you're always connected. We've been using Nord for years, so we can personally vouch for them. It's risk-free with Nord's 30-day money-back guarantee.

Number six: market volatility. Market volatility causes big ups and downs in stock values, which can impact your investment portfolio and retirement accounts. These swings are important to manage if you're planning to tap into your funds soon, like during retirement. One of the best ways to protect yourself against market volatility is to invest in safe-haven assets. Safe-haven assets retain their value and even appreciate when other investments might decline. Think gold or blue-chip art. During the 2008 recession, British artist Damien Hirst auctioned his work "Beautiful Inside My Head Forever" at Sotheby's, which raised nearly $200 million just as Lehman Brothers was collapsing. It's the strategies like this that are going to protect you even when you don't think you need it, and sticking with these long-term investment plans and avoiding the urge to sell off during a market low is key to keeping your portfolio's value steady over time.

Number seven: poor investment choices. The problem with poor investment choices is that most of the time you don't even know it's a poor choice until it's too late. But sometimes you do—sometimes you know you're taking a risk or a gamble, and you choose to do it anyway. Sometimes you're advised against it, but you think you know better, and those are the most dangerous times. These financial losses are far scarier than the mistakes because you'll keep making them. To guard yourself against this, you have to do your research—get yourself a financial adviser. Okay, do as much reading and keeping up with the news as possible, and talk to other people in the industry who you trust, because this is what's going to help you.

Number eight: natural disasters. Now, these are those emergencies you really think will never happen to you. And even if you did think it through and developed a plan for what you would do in a natural disaster, well, you risk people thinking you're some kind of doomsday prepper or dramatic overthinker. In some places, planning for natural disasters is a normal part of life, and in other places, the thought of it is ridiculous. But you really never know, and it's not worth waiting for something to happen to find out you were right all along. Hurricanes, earthquakes, fires, and floods can really hurt your wallet. These natural disasters can damage your home, car, and other properties, not to mention risk your life. Fixing or replacing what's damaged often costs a lot of money, especially if you don't have insurance. And sometimes you can't even work or earn money because the disaster is affecting your job or business. That's when your emergency fund comes to the rescue.

Number nine: bankruptcy. Now, while filing for bankruptcy isn't the financial death sentence we were often led to believe, if you don't have the proper strategies for fixing your finances, it is going to haunt you. It can lower your credit score, which makes it hard for you to get loans, and it'll impact your job options. If you file for bankruptcy, make sure you know all of the implications of it. Prepare yourself to make some difficult sacrifices over the next few years so you can actually use the file to your benefit instead of digging another financial hole. Before thinking about bankruptcy though, try every other way to manage your debt, like consolidation, talking to creditors, and reorganizing your finances. Talking to a credit counselor or financial advisor is important; they can really help you explore other choices that would be a better fit.

On a similar note, number ten: poor credit management. Isn't it crazy? We go out into the world, barely understanding how money works, get access to money that isn't ours, and we're encouraged to spend it like it is. Before you know it, you're a year into your first job and already in a credit hole. The only way to dig yourself out and keep yourself out is to make sure you educate yourself. Nobody else is going to do it for you. Take only what you need and what you're able to pay back. Use your credit card for its points and extra benefits, and never see the money you're given as free money. There's always going to be something more to it. This excuse makes sense when you're young, but as you get older, it's time to buckle up and make sure your financial situation looks good on paper and in person.

Number eleven: divorce or separation. Nobody plans to divorce or separate when they're spending thousands on their wedding, and yet it happens all the time. Very few people have a strong financial plan in place in case it does happen. And we get it, okay? Planning to fail feels like you're already failing. But what was it that Benjamin Franklin said? You know the one: failing to plan is planning to fail. At the very least, you should be following the route that will give you fewer headaches. Risking getting divorced or separating from your partner can cost a lot of money. You have to pay for lawyers and court fees and split your money and property down the line. It's a major financial knock for everyone involved. Whether you split everything down the middle and end it amicably, or drag it out for ages, it's going to hurt. Go into marriage knowing your possible financial situation if you divorce. Talk about these things with your partner, and if you accrue assets throughout your marriage, work out your plan in case anything happens. It's pricey enough for the whole process, but when you've got to get lawyers and mediators involved, it can totally drain both of your funds. Knowing about your finances, and possibly talking to a financial adviser or lawyer before making any big decisions, can really save you money and stress later on.

Number twelve: YOLOing with your finances. Remember that YOLO saying—"you only live once"? Our treat yourself, let go, have fun excuse for doing whatever you want? Well, the trendiness of the term might have passed, but the lifestyle hasn't, especially when it comes to finances. Planning your finances when you don't have a lot of money feels pointless. What would you use the plan for anyway? On the other hand, planning your finances when you do have money feels frivolous. Your money is your freedom, and planning traps you. At least that's what it feels like for a lot of people. But it's not about boxing yourself in so you don't have any fun in life—no! It's about getting used to following some kind of financial structure. So if things ever do hit you hard financially, you've got the tools and the emotional bandwidth to work it out and follow a saving strategy. Your plan can be small and basic to start off with. As you adapt your behavior to fit your basic plan, you can tighten up your goals a bit. You keep doing this until you get to a point where following a financial structure, budget, or plan feels comfortable again. Your plan will help you to reach your goals, figure out how much money you need to save, how much you can spend, and where you should invest next. Make your plan, set your goals, follow your plan, and then one day you'll be rolling around in your millions.

Number thirteen: depending on a single income source. So much of our anxiety and stress comes from things that are out of our control, and your job is one of them. Sure, it's in your control how well you do your job, but company changes, economic turmoil, and even a difficult boss can risk all of that. You never feel quite secure unless you've got some other sources of income. These other sources don't have to match your salary, although it's great if it does. If you've got a decent in investments that increase every month, it's like having emergency savings that keep increasing. A second job helps too, although ideally, you want something that doesn't trade your time for money. If anything happens to your main job, you've got the mental bandwidth to quickly search for something else without having the worry of fully meeting all of your bill payments on time. Having more than one way to make money really helps to protect you. You could start a side business, invest in stocks or real estate, or even have a part-time job. These extra sources of income can make you more financially secure. They can also help you to build up your savings faster. So think about different ways to earn money so you're not just relying on one job or one paycheck.

Number fourteen: major interest rate increases. Interest increases are one of those things you don't think affects you until you need to borrow money. It's probably also one of those things that we don't want to think about until we need to because it feels like we've got no control over it. It can be a real punch in the gut if you've got a loan or mortgage with a variable rate. It makes budgeting look like a joke. What's the point of planning if a bank can decide they need to make more money, and it comes from a payment you didn't plan for? Even if your monthly fees are a little bit more, you should be going for a fixed interest rate. These last few years have shown that we can revel in the showers of money and good mortgages from the post-pandemic phase, and then just a year later, we want to hide in the leaky basements of the new homes we can't afford because interest rates have decided to take a space shuttle to its next destination. So what do you do? How do you dodge this threat before it hits you? Well, start off by keeping your debt under control, get that fixed interest rate, and pay attention to the economic climate. Any major fluctuation is going to try and balance itself out over the next few years. The great times don't stay great, but you know neither do the bad times.

And finally, number fifteen: if your business fails. We'll always be the first and loudest advocate for starting your own business. The freedom, joy, sense of achievement, and financial opportunities are fantastic. Sure, it's stressful, but the good outweighs the bad. We're still realistic though, and realistically, a good percentage of entrepreneurs fail with their first business, and even with their second business and third. Each failure is a big financial and mental knock, so you at least need to have an idea of what you'll do if it doesn't work out. Starting a business is as much a threat as it is a key to freedom. It's risky, and not all businesses will succeed. But, Alex, you'll never know unless you give it a shot.

That's a wrap from us today, my friend. As you can see, knowledge is your greatest ally, planning is your best friend, risk is your enemy, but also your opportunity. So if you want to move forward, you have to take some risks. The only way you can protect yourself is to have some sort of plan. Keep your friends close, but keep your enemies closer.