Earlier this summer, the Economist Intelligence Unit updated a list of the top 10 global risk scenarios. They included:
n “China experiences a hard landing.”
n “Currency depreciation and persistent weakness in commodity prices culminate in emerging-market corporate debt crisis.”
n “Donald Trump wins the U.S. presidential election.”
n “Beset by external and internal pressures, the EU begins to fracture.”
n “ ‘Grexit’ [Greek exit] is followed by a eurozone break-up.”
n “The rising threat of jihadi terrorism destabilizes the global economy.”
n “Chinese expansionism prompts a clash of arms in the South China Sea.”
n “Global growth surges in 2017 as emerging markets rally.”
n “The UK votes to leave the EU.”
n “A collapse in investment in the oil sector prompts a future oil price shock.”
While any one of these events could throw the world’s economy into a tailspin — in fact, one of them, the UK’s Brexit vote to leave the European Union, has already come to pass, causing some short-term shock — they are out of our control. So if you’re determined to worry, it may be smarter to concentrate on the financial risks that are within your ability to manage.
Here’s a top 10 list:
Ignoring your cash flow. It is hard to live within your means if you have no idea where the money is going. Regardless of your income level, the key to reaching your financial goals is to start with a simple task: Track your income and expenses.
Borrowing too much. Whether it’s for a house or for your child’s education, carrying too much debt can prevent you from taking care of important financial goals and can also create a huge emotional burden.
Having no emergency reserve fund. Bad, expensive luck can strike at any time, so it is vital to save an easily accessible, liquid cushion of six to 12 months’ worth of expenses if you are still working and 12 to 24 months if you are retired.
Not buying sufficient life insurance. If you have dependents, prepare for the worst-case scenario by purchasing adequate life insurance. In most cases, term life will do the job.
Not contributing to retirement as early as possible. Ask any retiree about the biggest mistake he or she made and it will likely be, “I should have started saving sooner!” Establishing the automatic saving habit early pays huge dividends in the future.
Tapping retirement funds early. While the IRS does allow for hardship withdrawals in certain instances, too many workers who leave their jobs cash out plan assets and pay a tax penalty instead of rolling over the funds into another retirement account.
Failing to manage retirement funds wisely or efficiently. Whether it’s not rebalancing, owning too much company stock or using high-fee funds, retirement savers are costing themselves money with easy-to-rectify oversights.
Claiming Social Security early. You can claim Social Security retirement benefits as early as age 62, but doing so will permanently reduce your (and potentially your spouse’s) monthly income by as much as 25 percent.
Not drafting a will / power of attorney / health care proxy. Don’t create a mess for your heirs. Draft the necessary estate documents now.
Not seeking help when you need it. There is no shame in admitting that you need help with your financial life. If you want customized services, I recommend working with a professional who has earned the CFP certification or is a CPA personal financial specialist. You can ask for referrals from friends or colleagues or use the search tools offered by the Certified Financial Planner Board of Standards, the Financial Planning Association or, for fee only advisers, the National Association of Personal Financial Advisors.
Jill Schlesinger, a certified financial planner, is a CBS News business analyst. She welcomes emailed comments and questions.