We are always busy planning for more of the positive, for growth or for fun stuff. Right now, you are probably planning a night out, a weekend away, your annual holiday, to enjoy your grandchildren, or even a big overseas trip.
However, do you ever allow for “what can go wrong ”? If you do, you can probably survive bad times too, and save yourself a lot of heartache.
Illness - mental
Illness - physical
Early dementia or Parkinsons disease
Death of your spouse
Key staff illness or accident
Economic downturn in NZ
Poor produce prices
Floods & droughts
Rising interest rates
Fire or storm
How would one of these events impact on you?
Spend a few minutes thinking about each of them, the impact it might have, and how you can plan ahead to mitigate it.
This is called risk management
Many old pilots will tell you about Murphy’s law - “What can go wrong will go wrong”. Not entirely true. If and when you get organised, and do a bit of (pre-flight) forward planning, less things seem to go wrong and you are much less likely to get cleaned out entirely.
You can probably save some money too
The three main insurances keep rising as you get older, and very quickly once you are over 55.
You should review them, and you will find you probably should reduce them too.
Life insurance - calculate it - how much cash will your spouse need if you die? For example, final expenses, on-going income required, mortgage and debts to be paid, and more.
Medical insurance - it will cost about $200,000 if you keep it till age 90! Should you cancel it? Read my book, page 228 & 229.
Income replacement - if you can extend the deferral period to 180 days or even longer, the premium will come down.
Some risk management tools you might use
Excess debt - attend to it
Liquid emergency money on hand
Retirement planning attended to
Enduring powers of attorney
Business partnership agreements
All loans you have made fully documented
Diversification of your assets
In in doubt, do half
Self employment - you can't be made redundant
A few other things
If in doubt, get unbiased advice from someone outside your family and friends, ideally a professional.
Review things annually.
Before doing anything big , always do a “rose coloured glasses” list and a “what can go wrong” list, and heed the result.
Two issues for small business owners
Retirement planning - sometimes businesses sell well, and sometimes they don’t. Unless you are really sure it will sell well, divert some money and invest it elsewhere.
Do an annual SWOT analysis - strengths, weaknesses, opportunities, and threats - it might be quite revealing. It may also help you gain a new perspective and “see your business from the outside” which can be very hard to do.
Ever noticed how your cellphone battery is nearly flat when a problem crops up?
Be like a boy scout and “be prepared”.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media and online.
His second book “The Great NZ Work, Money & Retirement Puzzle” is now available.
You can buy it on line at www.acfs.co.nz