Whether or not you’ve planned ahead, surprises happen. Paula Dorion-Gray, of Dorion-Gray Retirement Planning Inc., suggests a few strategies for being prepared.
By definition, a crisis is a turning point, a time when you have to make crucial decisions (often suddenly) that will affect your future.
Although smart planning is the key to effectively dealing with periods of crisis, you may find yourself suddenly dealing with an unexpected event that you didn’t prepare for, wondering what to do next. Whether you’re planning ahead or dealing with a crisis now, take control.
When planning, it’s important to identify and manage risk. While you can’t have a plan to deal with all possible risks, you can plan for events that seem likely and some events that may seem unlikely. At a minimum, you should have a plan for critical events such as death, illness and job loss.
Set up an emergency fund. Many financial professionals advise their clients to keep an emergency fund equal to at least three months’ worth of expenses. If you don’t have the emergency fund, you may have to make hasty decisions regarding your future, such as taking a job that you really don’t want or taking on unwanted debt.
Plan for contingencies. All plans should be flexible. Part of the stress felt when confronting a crisis is due to the aspects of an event that are unexpected and unpredictable. For instance, if you plan for a period of unemployment that lasts for three months, what will you do if it stretches for six months? Consider planning for a worst-case scenario and assume a six-month period of unemployment, just in case.
Organize your records. A key component of planning is organizing your records and personal papers. The time to find important papers is not in the middle of a crisis. Prior record organization becomes even more important if you become sick or incapacitated. Should you die, your loved ones have to assume responsibility for your finances. At the very least, you’ll want to set up a filing system and give a list of your important documents and advisors to a trusted friend for safekeeping.
When dealing with an immediate crisis, act, don’t react. To the extent possible, collect information and advice first, and then formulate a strategy. You may have only hours or days to do this, but some plan is better than none. Create a simple list of things that must be done. A list will help you to focus on action, not reaction.
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Paula Dorion-Gray, CFP is CEO of Dorion-Gray Retirement Planning Inc., 2602 IL Route 176, in Crystal Lake. Securities offered through Securities America Inc. Member FINRA/SIPC. Advisory services offered through Securities America Advisors Inc. Dorion-Gray is not affiliated with Securities America companies.