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Financial Prepping in Uncertain Times

Why do we prep for the unknown and the unseen? It is because it allows us to prioritize and prepare for the unexpected. When we think about how we prepare in this day and age, we need to be thinking about making sure we have the necessary provisions to take care of ourselves and our family when things don’t go as planned. There is always a reason to be prepared.

Living in a four-season state, for example, we take comfort in keeping a supply kit in our cars in case we break down or an unexpected snowstorm.  We may prepare for doomsday by having a six-month food and water supply in our basement or have it on hand to hunker down safely if we’re threatened by major storms or hurricanes.

We prepare for our daily lives in how we dress. In summertime, we wear shorts and golf shirts because it’s hot and humid. But that doesn’t mean we get rid of our ski jackets and sweaters. We keep them in the back of the closet for when it gets cold again. And in wintertime, we’ve got boots and parkas. Just because it’s cold and snowy doesn’t mean we toss out the lawnmower either. It’s all part of prepping and prioritizing for the unexpected.

How Should We Do It in Our Financial Lives?

  1. Emergency Fund. If you’re not prepared for the unexpected, usually the unexpected will certainly come to roost. Whether it’s a roof leak, a major automobile breakdown, a busted hot water heater or worse, like, God forbid, you lose your job, you’ve got to be prepared for the unexpected. An important element to having an emergency fund is eliminating debt. If you have an emergency you don’t want to owe someone on that side.
  2. Disability Insurance. If COVID taught us anything, it’s that one thing can affect every one of us. Prior to having vaccines, we were all sent home from work and nobody knew what was going to happen. “Am I working from home for the next two weeks, two months, what?” and “Am I going to lose my job?” Know that disability can affect anybody. It is more important now that it has ever been in the past.
  3. Life Insurance. None of us know when our time is up. That is why you want your family, those who are dependent on you, to be taken care of in the event of your premature death. And if you live past when your term life policy matures, have a party!
  4. Wills and Estate Plans. Cover your estate. Make sure your heirs are the sole beneficiaries and that your powers of attorney are in place, your living wills, because if you have that unexpected event, like incapacitation, then you’ll need to have someone represent you financially, from the health care side and the medical side.  

Basically, with financial planning, you want to become self-sufficient. You want to cover all bases. It’s important to make copies of all your documents and important papers in both digital and hard copy. You never know when you might need them.

 In Practice, It Works Like This

We had a client who did not want to do long-term care insurance planning even after we went over the numbers, showed them how they worked and what was being covered. They refused to take the advice. They said it was too expensive and did not think they needed it.

I remember saying, “If you don’t prepare for this, it’s going to be a thousand times more expensive for you.” But, at that point, there was no convincing them, so we had them sign off on declining LTC coverage and we moved on. Even with investments and simple planning, if folks decline we have them sign off on to protect them and us.

Unfortunately, it wasn’t long before she went into a long-term care facility financially unprepared for the next seven years of care. After seven years, while thankful she was able to leave – most do not – she had paid for her care out of pocket all those years. It wasn’t long before she wiped out all of her assets and only had Social Security left . Medicaid coverage was then applied for.

Thankfully, This Client Said Yes

Danny, in his forties, married, the breadwinner in the family with three children under the age of fifteen, is a client that we put enough life insurance on for the family to be protected.

When we showed him the numbers – the Capital Needs Analysis ­– he got it right away. I think the most important thing is to show both spouses the numbers. If something happens to you and you’re gone, you don’t want your surviving spouse to have to go back to work. Besides, you’re putting your children’s future at risk too.

So we got him to the point of what would be needed to pay off any debts, have an emergency fund in place, three college educations, and a pile of money that his surviving spouse, who didn’t work, could sit back and draw an income off of for the rest of her life if she wanted to.

And then, sadly, at 49 years old, Danny was gone.

So this is why I always say it is all about being prepared for the unexpected and becoming self-sufficient. You don’t want to worry about the government taking care of you. You don’t want to have to worry about a spouse having to go back to work. You do want to make sure that you have all the bases covered.

In my world as a financial planner, I am good at what I do and you are good at what you do.

My job is to simply give good advice to lay out a financial plan that is in part to help you be prepared. And hopefully, I’ll make you think about some things that you’ve never thought about before. Hopefully I can open your mind to some new ideas for preparing unexpected events.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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