For many of us, our automatic response to worry is to freeze. Not having a secure path clearly and directly in front of us, we stop…waiting for clarity and security to emerge, as if by magic, out of our delay.
A brief delay in a moment of panic, emergency or significant change is fine. You need a moment (or a day, depending on the circumstance) to evaluate your new circumstances. What we must not do is give in to any ostrich-like inclination to bury our head in the sand and simply not look at the difficulties ahead.
Delay or denial will not make your problems (real or imagined) go away. Dealing with them will.
In the case of financial planning, delay due to uncertainty may lead to disaster. When you are insecure about any part of your future, the thing to do is not delay financial responsibility, but to deploy it.
The trick is in knowing which parts of your financially responsible plan you should prioritize. It does make a difference.
1. Do not delay protection. If your financial evaluation shows that death, disability or a protracted illness would sink your financial ship, don’t wait for the perfect time to address those issues. Work with a licensed professional to put in place legal, financial and insurance moats around your castle. Calamity doesn’t take a holiday just because your future is looking hazy.
2. Do not delay dumb-debt reduction. If you’re worried about your paycheck stopping for a time, get your dumb-debt in the best shape possible. Eliminated would be nice. By dumb-debt I mean the debt you now have for buying something you didn’t really need that is now worth less – a lot less – than what you paid for it. Your home mortgage is probably not dumb-debt. Your credit card balance for last year’s wardrobe probably is. You’ll want as much of the dumb-debt out of your life as possible if your job comes to an end.
3. Do not delay significant saving. This is the first cousin of #2. If you don’t have any dumb-debt – congratulations! Use the funds you would have applied to debt reduction to significant savings. In “normal” times, I recommend 15% of annual income or more going to savings. If you have concerns that your source of income may be temporarily cut off, you’ll want to make sure your pool of reserves is as deep as possible. Save aggressively, starting now.
4. Do postpone optional purchases. If you are paying down debt and saving, you’ll just be tearing down your work if you make unnecessary purchases. Of course you’re going to have to spend money – that’s not the issue. The issue is making sure that you are protected and liquid going into any time of possible crisis. I know that 60 inch flat screen hi-def TV you bought three years ago is hopelessly outdated, but maybe you can get by another year without an upgrade.
We do worry about a lot of stuff that never actually happens.
Just don’t let your worry devolve into delaying a deployment of your responsible financial plan.
That would be the real crisis.
Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Email him at email@example.com. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.