SVB & Risk Management

Mar 14, 2023

If this weekend reminds me of anything, it's that solid risk management is the foundation for every financial plan and one area so many people overlook. For individuals, this is a potent reminder to focus on the risk management fundamentals of your personal financial plan.

Keep solid cash reserves(3-6 months expenses): This is a fundamental non-negotiable in any economic environment and a basic personal finance tenet. I don't prescribe financial advice that is dictated by current economics as I believe it just causes panic. However, keeping 3-6 months of expenses is good practice whether the economy is going well or not.

Ensure you have positive cash flow: If you are paycheck to paycheck (regardless of income level) you need to address that before anything else. Make more money, reduce expenses or both. Just remember that you can only cut so much but your income upside potential is unlimited.

Revisit life, disability, liability, and health insurance coverage: Insurance that does not have a cash-value component might feel like a "waste" if you listen to many insurance experts, but it isn't. For most, term life insurance is more than sufficient. If you cannot afford a permanent policy, please at least buy a term life insurance policy to cover your loved ones' necessities. Don't stop there though and ensure you have adequate long-term disability, liability, and health insurance coverage.

Keep bank deposits under FDIC insurance limits: You have up to $250,000 of FDIC insurance coverage per ownership type per institution. If you have large cash balances over this limit, please move money to other financial institutions(although barring an imminently large purchase, I take issue with most people holding more cash than that).

While we might worry about general economic conditions, I believe there would be much less panic right now if individuals had these basic financial tenets resolved.

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