Thursday, 9 September 2010

In defence of frugality (Part 6 of 7)


[2] The delusion of invulnerability: no matter how good your health insurance is, its coverage won't be universal. Similarly, your protection in the field of liability indemnity might be less than you think. What would happen if, due to some unfortunate event, you were to lose your protection altogether? Do you have a back-up plan?

Overspending is frequently caused by overconfidence. People feel sure that nothing bad can happen to them. They overestimate their strengths and underestimate their risks. They place their future at jeopardy in order to enjoy transient advantages that will be quickly forgotten.

You will be better off if you reduce your current costs. Aim at creating an emergency fund to which you can resort in times of need. Even a modest financial reserve can do wonders to alleviate misfortune or adversity.

Discard the delusion of invulnerability and assess your risks objectively. Make the commitment to save at least 5% of your net income every month.

To be continued in Part 7

[Text: http://johnvespasian.blogspot.com]

[Image by Wonderlane under Creative Commons Attribution License. See the license terms under http://creativecommons.org/licenses/by/3.0/us]