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Protecting your family and finances in challenging times

By on March 30, 2009

The global recession is hitting us all. There are few – if any – people I have spoken to recently who have not been touched. In the past few months alone we have seen a mass exodus of expatriates from Tokyo leaving us all in a dizzying state of fear and confusion. Am I next to get cut? What is going to happen if I can’t get a job before my savings run out? Will I be able to support my family? Clients, friends and acquaintances are all suffering the same feelings of insecurity. How can we protect ourselves in these uncertain financial times?

First and foremost it is important for everyone; no matter if you are a part of a family, a head of household or a single person here in Tokyo, to make sure they have a cash reserve in the bank for emergencies. In normal markets we would recommend 3 months of living expenses in a liquid account. Considering the job market coupled with the fact that expats who lose jobs here may have to return to their home country, this figure may be closer to 6 months. 

Secondly, everyone must take a serious look at what kinds of insurance they have set up to protect themselves and their families. Are there holes in your planning? For example, many people may consider getting income replacement insurance because they are the sole breadwinner, however anyone who does not have a financial support network set up should consider how to protect themselves.  Insurance is a useful tool but there is no need to buy too. Take a realistic look at your needs.

Thirdly, if you do, you get a decent severance there are a lot of things to consider. What is the best thing to do with it? The volatility in currency markets is enough to make even the most experienced investor cringe. Moving a lump sum of money may or may not be in your best interest. What are your and your family’s goals and needs? Are you going to be able to find another position here in Japan or are you going to have to move countries for a new position? Is it necessary to take a currency risk or is dollar cost averaging in the best way for you to go?

At the best of times many people want to think of their financial security only after a trip to the dentist for a root canal. Sub prime, the credit crisis and now the deepening global recession have reinforced the need for careful maintenance of every family’s financial planning. Much like your dental health, being proactive goes a long way to ensuring future difficulties are marginalized.

Heather is a senior advisor with Financial Partners KK. Should you have any questions please contact her at heather.mcleish@financial-partners.biz. 

About Heather Day