Personal Finance, Part 2 — Risks

I view personal finance through the prism of risk management. What can go wrong? Here are many of the threats that the average person faces:

  1. Die too soon
  2. Bad health
  3. Disability
  4. Inflation/Deflation
  5. Unemployment
  6. Property & Liability losses
  7. Live too long
  8. Not earn enough on investments

This list is not exhaustive; perhaps you can think of more. Each one reflects an aspect of life that we don’t fully control.   Some of them can be fully or partially hedged through insurance (1, 2, 3, 6, 7), some can be fully or partially hedged through investment policy (4, 8 ), and some can’t be hedged at all (5).  My next few articles in the series will deal with the hedgeable risks, and what reasonable strategies can be for dealing with each one.