Non-Financial Planning to Prepare for Financial Hardships
Last week’s column offered four ways to prepare for inevitable financial calamities by building a financial shield against disaster. This week adds four more strategies that are as much about people as about money.
1. Build a good support team before you need one. In the middle of a financial trauma isn’t a good time to find professionals you can trust. This is best done when you are not under pressure and can take the time you need to research, interview, and analyze options. Professionals you need to vet and have on call could include an attorney, accountant, doctor, therapist, financial planner, insurance broker, bookkeeper, and banker.
2. Keep your career skills up to date. Most people don’t think of their career as their biggest financial asset. Yet until you become financially independent, there is no asset more important than your ability to earn money. Most employees neglect taking the time and money to invest in improving and refining their skills. This is crucial if you are in a field that’s becoming obsolete (like film photography, print media, or calligraphy).
It’s also important if you put your career on hold to stay home and raise children. It’s not too soon to begin preparing to reenter the work force several years before your children are old enough. Even if you don’t intend on going back to work, keeping your skills sharp is good insurance in case you need to reenter the work force because your spouse loses a job, dies or becomes disabled, or you divorce. Anticipating and preparing for a career change before it’s forced upon you can literally add hundreds of thousands of dollars to your future net worth.
3. Plan ahead for college expenses. Okay, sending your child off to college really isn’t a financial calamity. However, it never ceases to amaze me how many parents wake up in horror when their child is 17 to the fact that large tuition bills will be coming due in a year. All of a sudden college tuition becomes a financial emergency.
In most cases, parents dig deep to fund their child’s education, harming both themselves and the child by suspending what they were saving toward their retirement. Studies show it’s cheaper for kids to put themselves through college than to support elderly parents who didn’t provide for themselves.
If you find yourself in this situation it’s imperative you shop colleges just as you would anything else. Most colleges are not a good buy for the education received. Compare the average salary of the degree you are obtaining with the cost of obtaining it.
If you plan to pay part of your kids’ college expenses, start saving when they are still in diapers. Also consider other options well ahead of time, like kids working their way through college or buckling down and qualifying for scholarships.
4. Invest in your coupleship. The number one destroyer of wealth is divorce. It makes good financial sense to invest in keeping your marriage healthy and strong, giving it some emotional cushion to get through the inevitable tough times that befall any relationship. That includes tough financial times such as a job loss. Many couples help their marriages thrive by setting aside time annually to attend a couples workshop, by obtaining counseling to improve communications skills, or by periodic romantic retreats without the kids.
When it comes to coping with financial calamities, having career options, trusted advisors, and thriving family relationships are as important as building a financial cushion. All these strategies will help you and your family weather the inevitable financial challenges that are sure to come your way.