Planning for Life’s Uncertainties

Last week we covered some financial planning strategies that go with the normal stages of your life, and the importance of working with a qualified financial advisor. This time, we’ll discuss how a good advisor and a good plan can help you through events that can occur unexpectedly.

A good advisor can helping you stay on track when major events impact your life. These situations are almost always emotional and you can easily make rash decisions that aren’t financially sound. Be sure to consult your advisor if any of these events befall you. Working with your financial advisor will help you approach financial matters in a calm and orderly matter in this time of stress.

Job Loss:
Losing your job can be both an emotional and financial setback. Revise your budget to stretch your unemployment income, severance, unemployment insurance benefits, and emergency funds as long as possible to cover off your living expenses. Try to develop a cash-flow so that you don’t overreact and sell off investments to foot the bills. If a severance package is provided and you have the choice of a lump sum or a continuation of salary, review both alternatives before making a decision. Lump sum is usually better but if the continuation includes extended health and other benefits it may be the better deal. Remember that it is important to continue your insurance coverage.

Divorce/Remarriage:
With your advisor, you will need to construct a new, comprehensive plan to address the changes in your circumstances. If necessary, revise insurance to remove your former spouse as beneficiary. You and your advisor may need to work with the other professionals to assist you in structuring the divorce settlement.

When you remarry after divorce and there are children from your first marriage you will probably need to establish a new set of financial priorities and take the long term approach. Satisfying estate planning in particular becomes more challenging depending on your circumstances.

Widowhood:
After the loss of your spouse, your financial plan may need revising. Your advisor can help identify resources you need to settle the estate. An attorney will need to probate the will, and changing titles and ownership will be necessary. If you are the beneficiary of a life insurance policy, you will need to decide how to handle the proceeds. You might receive them in a lump sum settlement, fixed payments or an annuity. It may be preferable to take the lump sum and park it for six months rather than make a quick purchase of an annuity.

One of the key roles of the financial advisor is to help you prepare for these major life-altering events, whether it’s setting up an emergency fund, assuring proper insurance coverage is in place, or that a will has been made and updated. Having a plan in place can at least cushion the financial impact these events can produce.