Originally Published: April 13, 2026
People often talk about how entrepreneurs can de-risk their enterprises, but it’s often much more important for the average person to de-risk their personal finances. The idea here is to mitigate the challenges that market crashes, job loss, health issues, or unexpected expenses could bring. What are the best strategies available? What should you be doing?
Build a cash fund
You’ll want to start by building a robust cash fund. This should be a pile of money that you don’t touch unless there’s an emergency. Most people try to build a cash fund with three to six months of living expenses. The idea is to start small, perhaps with $500, and then build from there. Once you have this money in the background, you suddenly start to feel relaxed, like you’re not living on the edge all the time.
Protect yourself with adequate insurance
The next way to de-risk yourself is to protect yourself with adequate insurance. The types of insurance that you take out will depend on your life right now and the responsibilities that you have. For example, if you own a property, you’ll need home insurance. If you don’t have this, you could still be liable to pay the mortgage even if your property burns down.
Life insurance is critical if you have dependents, and disability insurance replaces your income if you can’t work for some reason. Health insurance obviously reduces the cost of major expenses, but just check that your policy has reasonable deductibles and covers things like long-term care, which you might need as you age.
Diversify your investments to reduce your risk
Another strategy is to diversify your investments to reduce your risk. Don’t make the mistake of putting all of your eggs in one basket. Instead, diversify across uncorrelated asset classes like:
- Crypto
- Gold
- Commodities
- Cash
- Bonds
- Equities
- Real estate
Also think about diversification by region. Don’t put all of your money into a single country, or invest solely in a place like the US, for example.
Create a budget that you can stick to
If you’re spending too much and your expenses are outpacing your income, that also constitutes a risk to your personal finances. Eventually, you’ll go into debt and you’ll be unable to save any money.
The best way to create a budget that you can stick to is to figure out what you are allowed to spend according to sound financial principles. Make sure you track your spending weekly and automate bill payments that you can’t avoid. If you can, cut out impulse buys and non-essential subscriptions. That’s a good idea, just make sure that you’re including buffers for irregular expenses like holidays or car repairs.
Build more than one income stream
Most people have just one income stream: their main job. This is risky if you are made unemployed or the company you work for goes out of business. You don’t have any other form of income, and you need to find another job. That’s why it’s a nice idea to have your main job, a side job, and investment income. Having income from three sources makes you more robust financially.
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Special thanks to the following source(s) for the image(s) used in this article:
- Source(s): Unsplash-CC0 license, Unsplash-CC0 license
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