Financial Planning: Preparing for the Unexpected

Mike Tyson supposedly once said before a fight that, “Everyone has a plan until they get punched in the mouth.” While we can argue the merits of the former heavyweight champion’s words of wisdom, I think that everyone reading this article has at some point in time experienced an unexpected event or initiated a dramatic adjustment, thereby causing a major life change.

My life the past couple years or so definitely demonstrates the sentiment underlying Mike Tyson’s words. In the course of the last several years I started a new career, got married, became a dad and bought an apartment. If you would have told me five years ago what my life would look like today, I would have chuckled. I knew deep down that I wanted everything that I currently have. But, oh man, did it happen fast. (For more, see: Financial Planning: It's About More Than Money.)

As most of you reading this piece can attest, when a major change takes place, adapting to your new environment is challenging. For me personally, this meant developing an entirely new skill set after switching careers. Long gone were the familiar confines of the foundations where I had previously worked - helping to run and grow a small business requires a different mentality entirely. And when not in the office, my definition of a good time has certainly changed since my son was born. Hanging out at bars with my wife and friends used to be my usual evening activity. That has since been replaced by watching shows in bed and praying our son doesn’t wake up in the middle of the night.

Not that I am complaining. I am grateful for and feel rewarded by my decisions. But my experiences have made sparklingly clear what were previously abstract financial planning concepts. Here are three things I’ve learned:

Be Conservative With Emergency Savings

If you only have a few months of cash on hand for emergencies, I believe it wise to sock away a couple more months. Yes, interest rates on savings accounts are pitifully low, so your cash is not going to earn much but not having money to access immediately in the event of an emergency is, in my opinion, a stressor you should avoid. Car repairs, job loss, an unexpected medical bill, twins when you were trying for just one child - these are all too common occurrences that readily available cash can help you to better navigate.

Financial Planning Is a Process, Not a Single Event

As you get older, life tends to become more complicated. When I was single, my financial life was straightforward. After getting married, things got slightly more complicated as my wife and I figured out who would pay for what and how to combine our financial lives in a way that we both agreed upon. After my son was born, we faced even more complexity as we had to factor in how best to take care of his needs. Life insurance, saving for my son’s college and establishing a will, for example, were financial objectives that wouldn’t have made sense for me to achieve three years ago. They are now essential components of my family’s financial future. (For more, see: Starting Early With Financial Planning.)

My point is that regardless of where you are in life, it makes sense to sit down with a professional to discuss your plan and then revisit it at least once a year to see if it needs to be tweaked. And if you don’t have a plan, think about developing one flexible enough to incorporate the inevitable curve balls that are going to come your way.

It's Okay That You’ll Never Have It Figured Out

Becoming a parent has made me think a lot about my own parents and the sacrifices they made and continue to make on my behalf. And what I’ve come to realize is that even as they have settled into their golden years, they still don’t have it all figured out. There are a lot of situations they are experiencing for the first time (being grandparents, refashioning their identities in retirement, trying really hard to understand how to FaceTime, etc.) and like many of us, they are doing the best they can.

No amount of planning will ever be able to incorporate all of life’s surprises, but what it can do is help prepare you for when they come. (For more, see: The Importance of Making an Annual Financial Plan.)

 

Disclosure: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC. Clearfront Advisory LLC. 157 Columbus Ave., Suite 436 New York, NY 10023. 646-779-9811. This communication is strictly intended for individual residing in the states of GA, IN, NJ and NY. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.