Bible Money Matters

Christian personal finance

Menu
    • About
    • Archives
    • Contact
    • Close
  • Making Money
      • Popular Articles

        • 50 Ways To Make Money: Maximizing, Creating And Increasing Your Income
        • 10 Weird And Unconventional Ways To Make Money
        • Making Money With A Blog (e-Book)
        • 10 Places To Sell Or Trade Your Unused (Or Broken) Electronics
        • Ways To Make Extra Money Series: 20 More Income Generating Ideas From Our Readers
        • Making Side Income Can Help Blunt The Impact Of Becoming A One Income Family
        • Earn Cash Back With Discover it® Credit Card
      • Recent Articles – Making Money

        • Best Sites Like Fiverr To Make Money As A Freelancer
        • 13 Of The Best Independent Contractor Jobs
        • 25 Of The Best Gig Economy Jobs
        • How To Make Money Blogging: Turn A Blog Into A Business
      • Categories

        • Making Money
        • Investing
        • Retirement
        • Jobs & Work LIfe
        • Money
        • Income
    • Close
  • Saving Money
      • Popular Articles

        • 50 Easy Ways To Save Money Every Month
        • 10 Weird And Unconventional Ways To Save Money
        • 10 Practical Ways To Save Money And Increase Your Net Worth
        • How To Save Money On Just About All Of Your Regular Monthly Bills
        • Ways To Watch TV Without Paying An Arm And A Leg For Cable TV
        • Save Money On Your Hospital Bill - Just By Asking
      • Recent Articles – Saving Money

        • How To Save $100k In 7 Practical Steps
        • Stairs App Review: Save And Invest To Earn 4-6% Interest
        • Honey Review: Save Money Automatically When You Shop Online
        • 9 Convincing Reasons Why You Need An Emergency Fund
      • Categories

        • Saving Money
        • Frugality
        • Planning
        • Finance
        • Saving For Retirement
        • Savings Accounts
    • Close
  • Banking
      • Best Rates For 2019

        • Best Credit Cards
        • Best Savings Accounts
        • Best Mortgage Rates
        • Best CD Rates
        • Best Brokerages
        • Free Credit Scores
      • Recent Reviews

        • TradeStation Review: Commission Free Stock And ETF Trades
        • Firstrade Review: Commission Free Trades on Stocks, Crypto, And Options
        • Cadre Real Estate Investing Review: Commercial Real Estate Investing
        • Axos Self Directed Trading Review: Invest, Trade Stocks For Free
      • Categories

        • Bank & Software Reviews
        • Investing
        • Credit
        • Banking
        • Mortgage
        • Insurance
        • Family Budget
    • Close
  • Recommended
  • Video
    • Close

3 Types Of Financial Risk You Need to Be Aware Of

By Miranda Marquit 2 Comments - The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited July 14, 2014.

Share14
Pin101
Tweet21
Share5
141 Shares

No matter what you do in life, and in finances, there is risk involved.

The type of risk involved, and your ability to handle it, is likely to vary, depending on the asset and the situation. Before you make a financial decision, make sure you understand the following 3 types of risk:

types-financial-risk

Inflation/Interest Risk

Many of us completely forget about this type of risk. A number of us remember to consider market risk when planning our finances, but it’s harder to remember to pay attention to inflation and/or interest rate risk.

Basically, this type of risk is what you need to worry about in terms of the way prices rise — and your purchasing/spending power decreases. Your money is worth less over time, so it’s important to ensure that you are earning a yield that overcomes the rate of inflation.

When you concentrate too heavily on assets like cash and bonds, you run the risk of not having a high enough interest rate to overcome inflation. In real terms, you are losing money. It’s important to be aware of the risks that come when you try to play too safe.

Liquidity Risk

On a macro scale, this risk is about the economy. Just after the financial crisis, there was a liquidity issue. Banks were reluctant to lend, and money wasn’t moving through the economy effectively. This made it difficult for people to get credit, and to buy things, and to help the economy recover.

Liquidity risk can also refer to whether or not you can get rid of assets. For instance, having a home can be a liquidity risk if you want to sell, since you can’t just unload it quickly or easily. It’s important to consider liquidity in your own life. Can you access the money in your emergency fund easily when you need it? If an opportunity pops up, do you have the resources to take advantage? Figure out how long it would take to marshal your resources if you needed them.

While too much liquidity usually means you give up the chance for yield, you also don’t want to have all your resources tied up in assets that are hard to convert to cash.

Timing and Situation Risk

Sometimes timing has a lot to do with your finances. When you get paid, when you owe money, and special circumstances that might affect your situation can all contribute to risk in your personal economy. If you are trying to pay down debt, but you keep getting hit with small emergencies, like your car needing repairs, your washing machine breaking, or some other issues, it can really affect your ability to manage your finances.

Likewise, sometimes you decide you need to do something quickly — and you might end up paying for it. I’m going to try to sell my house fast so that I can move out to Pennsylvania with my husband. It’s a situation that, due to timing, is likely to mean an expense for me. It’s not pretty, but my finances can (barely) handle it.

Understanding how these items can affect your finances is an important part of long-term planning. Be sure to consider them in your plans.

Related Posts

  • 5 Types Of Financial Resources For Stay At Home Moms

    There are plenty of free financial resources that take the guesswork out of financial planning and put the confidence and power right back in your…

  • How To Get Free Financial Help Online

    I’ve talked a lot over at One Money Design about my personal experience as a Money Map Coach and often share how this FREE program…

  • Financial Literacy Month: Why Being Knowledgeable About Personal Finance Will Save You From The Unexpected

    April is Financial Literacy Month, and was officially designated as such by the US Senate in 2003. Here's are some reasons why financial literacy is…

Share14
Pin101
Tweet21
Share5
141 Shares
Last Edited: 14th July 2014 The content of biblemoneymatters.com is for general information purposes only and does not constitute professional advice. Visitors to biblemoneymatters.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.

This article is about: finance

About Miranda Marquit

Miranda is a freelance writer and professional blogger. She writes for a number of personal finance blogs, including the AllBusiness Personal Finance Corner. She has a M.A. in journalism, and is the main author of Planting Money Seeds. Miranda lives Utah, where she enjoys spending her free time reading, traveling and playing with her son and husband.

Comments

    Share Your Thoughts: Cancel reply

  1. Nick says

    Inflation is a big risk that most people seem to miss when planning for retirement or any future purchases. We see inflation all around us, yet it never seems to be thought about in our everyday decisions to save.

    Reply
  2. Blake says

    The key to successfully surviving a liquidity stress event – something that is a very rare occurrence – is to understand exactly what is meant by “when they become due”. Essentially it means in perpetuity.

    Reply
Previous Post: Is It Possible To Live Without Credit? Or Is It Too Much Of A Pain?
Next Post: Best Android Apps For Improving Your Finances
Discover Investment Platforms

Popular Posts

  • 21 Easy Ways To Earn Free Amazon Gift Cards
  • 10 Best Free Tax Filing Services And Software Online
  • 21 Apps That Pay You Real Money Fast
  • 17 TV Apps And Live TV Streaming Services To Watch TV Free
  • 30 Legit Online Jobs That Pay Well
  • 37 Easy Ways To Get Free Gift Cards
  • How To Get Free Stock
  • 40 Easy Ways To Get Free Money Fast
  • 21 Places To Read Free Books Online
  • 24 Legit Online Jobs
  • 17 Best Work From Home Jobs: A List Of Legit Online Jobs That Pay Well

Recent Posts

  • How To Save $100k In 7 Practical Steps
  • How to Save Money When Remodeling A Home
  • How To Hire A Contractor For Your Remodeling Project
  • Remembering 9/11 Years Later: Where Were You On That Fateful Day?
  • TradeStation Review: Commission Free Stock And ETF Trades
  • Firstrade Review: Commission Free Trades on Stocks, Crypto, And Options
  • Cadre Real Estate Investing Review: Commercial Real Estate Investing
  • Best Sites Like Fiverr To Make Money As A Freelancer
  • Axos Self Directed Trading Review: Invest, Trade Stocks For Free
  • 30 Quotes About Easter And Resurrection: He Is Risen!

Disclaimer

The information contained in BibleMoneyMatters.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation.

In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.

Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.

Amazon and the Amazon logo are trademarks of Amazon.com, Inc. or its affiliates.

We respect your privacy: Privacy Policy.

Thanks for visiting!

Bible Money Matters - Seen On These Sites and more..
Bible Money Matters is a personal finance, entrepreneurship and investing community. Give more, save more and live more.

Copyright © 2023 · Bible Money Matters | Sitemap | Advertise | Privacy Policy