We are in a series discussing how strategies for running marathons could help you maximize your wealth in a meaningful way. If you missed strategy #1, click here to read that post.
Strategy #2: Have a contingency plan
One of the things I learned in my first marathon is that, holy cow, even if you show up early at Grandma’s Marathon in Duluth, you might have to wait 30 minutes to use the porta potties, and when you get in there, there may or may not be any toilet paper! Yikes! Little did I know that experienced race runners sometimes carry tissues or toilet paper as a contingency plan for this scenario.
The next detour I encountered after that first one with the toilet paper was just getting started, running around people in the slower groups, wasting a lot of energy, going in the ditch, and trying to weave through. Then, I had some fun contingencies that I didn’t expect. I stopped to high-five my kids and even some strangers. I stopped to kiss my wife, which was totally worth the few seconds I lost off my time!
You are probably wondering, at this point, what in the heck do contingency plans with marathons have to do with wealth management, and the answer is actually quite a bit, I think.
Financial planning is very similar in that you have to plan for detours, and contingencies do arise. You might hit higher tax rates, an emergency with your health, or an unexpected job layoff or change in pay. You might have an insurance deductible on your home that you need to fulfill or higher tax rates in retirement that you were not expecting.
By the way, if you want options in retirement for unexpected higher tax rates, you might not want all your money in a tax-deferred account. That is something you should discuss with your financial planner and your accountant. You can also click here to read about how Required Minimum Distributions (RMDs) could push you into the next tax bracket in retirement and what you can do about it.
Other scenarios that could happen are you could run into periods of higher inflation, receive lower Social Security benefits than planned, or experience an unexpected death or disability. And let’s face it, if you have children, sometimes they cost a lot more than we anticipate! I wrote an entire post on how to be prepared for financial emergencies; click here to read more.
These scenarios are all reasons to have a contingency plan in place. Have a financial plan, sit down with your planner, or pull up your plan online if you’re able to, and ask those “what if” questions. “Will I be okay if this happens?”
If your financial plan projects you to be in a strong place after these “what if” scenarios, hopefully, you can feel much more secure in your future and free to enjoy your money.
In the next post, we will get into strategy number three for effective running and building wealth. And that is to have an appropriate GPS to keep you on track. In the meantime, if you’d like more information about how One Life can help you create an investing strategy that helps protect, manage, and maximize your wealth, please click here to schedule a consultation.