how do i protect myself financially from my spouse

2020 will live long in our memories. Nobody expected what happened that year, which was challenging due to the lockdown, the COVID-19 pandemic, everyone wearing masks, and social distancing.

During that year, I decided to take time to review my investments and assess their performance. I also thought it was an excellent time to expand my knowledge.

I started listening to an audiobook called The Intelligent Investor by Benjamin Graham. If you haven’t heard of him, Benjamin Graham was one of the greatest influencers in Warren Buffett’s life. Warren Buffett learned a great deal from him.

To make a long story short, Benjamin Graham had an investment company that made him a lot of money. His company invested in securities like stocks, shares, bonds, etc. He had a philosophy of purchasing undervalued securities so they would be cheap enough to withstand stock market downturns caused by factors out of his control. So, even if the stock market declined, his investments would still be fine. He called this a margin of safety.

Benjamin Graham’s business allowed him to enjoy a lavish lifestyle. Unfortunately, due to some difficulties, he decided to close it down.

Benjamin Graham’s biggest regret was not the business closing but that he didn’t apply his business philosophy to his personal life. His lifestyle could not withstand the financial downturn, and he didn’t have a margin of safety.

There was not enough buffer between his income and expenditure to allow him to continue his lifestyle when his income decreased. He needed a lifestyle that could withstand any economic climate.

It is commonly known that the more a person earns, the more money they spend. In many cases, some people don’t even need to earn it. They just need a credit facility. It is essential to know whether you have a margin of safety. If you do, how much is it? Here’s how to find out:

1. Firstly, print off your bank statements from the last six months.
2. Let’s say you’re paid monthly; find the date you receive your monthly salary or income. If you’re paid more than once a month, you may want to choose your starting point but try to work within calendar months for consistency.
3. Take a look at the amount in your account the day before you receive your income and note it down.

The figure you have the day before you receive your income is your margin of safety. Whatever you have left on that day is your buffer. If you have any savings or other income sources, this adds to the margin of safety or buffer.

What if you didn’t receive any income this month? What if you didn’t receive any income the month after that? Are you able to survive financially without the use of credit? What if your lack of income stretched for six months?

Work out how long you could financially survive without borrowing or using a credit facility. It could be days, it could be weeks, it could be years. It could also be that you couldn’t survive a single day. How large or how small is your margin of safety?

Is the lifestyle you currently have built to withstand any financial downturn? Your bank account will tell you. If you have £50 left at the end of each month, you’re walking a tightrope. One sudden hiccup in your financial life may push you down the credit route, leading to financial issues. Your margin of safety is minimal. If your lifestyle is supported by credit every month, your margin of safety is negative. You are on financial life support.

It’s not always easy to increase your income, but you should always try to do so if possible. It’s essential that if your income increases, your expenditure does not. What you do with the income is key to building your margin of safety.

Just because you earn more money does not mean you should spend more. Someone whose income suddenly rises from five figures per year to seven figures doesn’t need to buy a Ferrari. I can guarantee that because they never needed it before the increase.

If they had a margin of safety with the five figures, the margin of safety should simply increase. As your income increases, the gap between the cost of your lifestyle and your income should increase positively. The more significant the gap between the two, the more chance and the longer you will be able to survive any financial downturn that may occur in your life.

Investing your money into things that can help it grow, like property or stocks or similar, can help increase your margin of safety further. Also, limiting your major purchases to necessary things will further increase your margin of safety. Is it essential to buy a new Mercedes just so other people can see you in it?

Your lifestyle should not depend on your salary. Its cost should be supported by profits from investments or passive income streams, such as property rental income.

Many people who receive a bonus or a sudden influx of cash look for an “exit” for that money. They look to see how they can spend it or may have already pre-spent it on a credit card.

Whenever you receive a bonus or a sudden influx of cash, pause... Do not touch the money, not one penny. Leave it in your bank account for a month, six months, or even longer. Let the adrenaline of receiving this new money die down completely. Get used to seeing the figures in your bank account. Only touch the money when you no longer have an interest in spending but in investing or saving, therefore building your margin of safety.