What to Expect When the Unexpected Happens
One thing you can count on in life is that the unexpected will arise. Sometimes it’s in ways you could have imagined, but sometimes it manifests in ways that catch you completely off guard.
Unforeseen Medical Expenses
Most of us don’t plan on serious illness or injury. And who has really prepared for possibility of an extended stay in the hospital for any reason? It’s not a fun thought to dwell on but it could be reality.
HSA (Health Savings Accounts) offer some great benefits to those who qualify. You can read more about why I think HSAs are beneficial here.
Many hospitals and medical providers will negotiate with you or reduce the amount you ultimately owe. Prepare now by saving diligently and educating yourself on your options. Stay healthy by eating right, exercising regularly, and participating in yearly checkups.
Death or divorce can leave one suddenly single. These losses are traumatic experiences that change lives forever. In the midst of dealing with the grief and pain of the loss of a loved one, there are financial matters that must be considered. Even couples who have discussed the financial implications of losing the other may discover their plans are no longer relevant because of changing circumstances.
In these times, it can be difficult to take the next steps confidently, or to know where to turn. Added stresses of financial strain or instability can make an already difficult situation feel unbearable. When dealing with divorce, the death of a spouse, retirement upheaval, and unexpected medical expenses, biblical truth and a financial plan are more necessary than ever.
Here are practical steps you can take now to prepare for the unexpected.
Record-keeping is one of the most important steps you can take to prepare for unexpected events. This includes keeping a handle on your bills, any debts, investments, and bank statements.
And when the unexpected does happen, it’s very important to stay up-to-date and not fall behind whether you maintain your finances online or on paper. It may be beneficial to recruit a family member or hire a financial advisor to help you get through the initial weeks and months after your loss.
If you’re faced with overwhelming credit card debt, contact Christian Credit Counselors. They’ve been our trusted partners for years and have a highly equipped and professional team that can help you develop a plan to pay it off faster and with less interest.
As soon as possible, gather all the documents you can find that are related to your financial affairs and review them. Are there life insurance companies that need to be notified? Does your spouse’s employer need to be notified for retirement plan or group insurance plan purposes? Do brokerage companies or lenders need to be notified to change the name on your accounts?
Here’s a list of the documents you’ll need:
- Social Security card
- Insurance policies
- Loan and lease documents
- Birth certificate
- Stock certificates
- Brokerage account statements
- Bank statements
- Mortgage documents
- Retirement plan documents
- Employment contracts
- Partnership agreements
- Divorce agreements
- Funeral arrangements
- Death certificate
- Tax returns (4 years)
- Safe deposit box information
One of the most pressing matters is to compare your cash on-hand (liquid assets) and bills or debts you owe (liabilities). You need to have a clear idea of what your financial obligations are, and if you have the cash to address them. If cash is low, you may have to decide which bills you can pay now and which you have to delay. Contact your creditors, explain your situation, and be sure to always pay mortgages, health and property insurance, and utilities first.
Another important issue is your insurance needs. If you have just lost your spouse and you have no dependent children, you may be carrying too much life insurance. If, through death or divorce, you are now the sole supporter of a child, you may have too little life insurance. You can calculate your life insurance needs here.
You may also want to take out a disability policy on yourself if you don’t already have one, so that if you were unable to work you’d have money to support yourself and your child. If your spouse was the beneficiary on any of your insurance policies, you’ll need to designate a new beneficiary.
Some financial issues can usually wait for a few months, such as reviewing and making changes to your investments. These important decisions should not be made immediately after a death or divorce, if at all possible. Once you’re ready, you’ll want to create a net worth statement (a list of your assets and liabilities), and a budget, showing your expected income and expenses, and then assess your investment strategies. You may want to consult a financial professional (accountant or financial planner).
You will also find yourself faced with lifestyle decisions such as whether to move to a smaller house or apartment, move to a different town, return to school, or travel. Having a firm grip on your financial affairs will make all of these decisions and the transition to single life a little less painful.
Shockers of Retirement
Many think they are all set for retirement and then met with a jarring reality that their savings are lacking, or an unexpected event knocks them off track. This could be due to adult children moving home, taking care of aging parents, unforeseen medical costs, illness, injury, or unemployment.
Pensions and Social Security may not be enough to cover these costs, and most people don’t plan for these unexpected expenses during retirement planning. Careful planning can help you weather any storm that may come your way.
If you face a retirement shocker, you essentially have 3 options:
- Postpone your retirement to continue working and save
- Retire and adjust your lifestyle to meet your new budget (decrease your standard of living or cost of essentials)
- Retire and supplement your retirement income with part-time work
As Solomon and any investment advisor will tell you it is imperative to have a highly diversified portfolio when it comes to investments. This is especially important the closer you get to retirement so you are less subject to the volatility of the market as you begin cashing out your investments.
Continue with a long-term perspective as you enter retirement. Don’t make the mistake of getting out when the market drops or trying to jump in when it is going up which will only hurt your long-term portfolio.
Create a plan early on and commit to stick to it. When the economy affects your plan make adjustments to get back on track.
You can visit the social security website to use the Retirement Calculator to get an estimate of your anticipated benefits.
As you are planning for your retirement and unplanned costs, don’t forget these basics:
- Invest with a long-term perspective
- Diversify, Diversify, Diversify
- Plan to pay off your mortgage and be totally debt-free
- Delay Social Security
- Don’t retire at the first opportunity
- Take care of yourself – exercise, eat healthy, keep stress to a minimum and seek preventative care from your doctors
In all of this, remember who is ultimately in control. Meditate on Jesus’ words in Matthew 6:
‘“Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Can any one of you by worrying add a single hour to your life?
So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.’
Resist the temptation to live in fear, and to bury yourself with the burden of “what if?”. Instead, plan for the unexpected and seek the Lord in every circumstance. He sees you, and knows your every need. He is never caught by surprise.