This year has delivered much more than a health crisis to our world. In 2020, we’re in the midst of a well-being crisis.
Growing pressures surrounding our personal lives due to the global pandemic have caused physical, emotional, and financial strains. Many families are having to reimagine how to best support themselves financially, particularly if there’s been job loss or displacement. Similarly, there is also an increased calling to keep ourselves and those around us in the best possible spirits in an environment that’s challenging and emotionally draining.
In this moment of uncertainty, your overwhelming priority is to protect your family and your assets by creating contingency plans. But where do you start?
The word “contingency” can sound scary. Sometimes the stress can cause us to freeze or avoid what is causing the stress. Even just starting to organize your documents or identifying important phone numbers can help your family get through a crisis more easily. Think of these actions you can take now as a gift that will have a positive impact on your family and provide them with long-lasting benefits when they are needed most.
It’s human nature to believe we’re immune to the unexpected; but what happens when the world delivers us the unanticipated anyway? Would you be able to pay the bills? Do you know whom to contact? These are unpleasant questions that might heighten your stress just thinking about them, but it is critical that you can answer them easily and confidently. Knowing these answers means you have a handle on the information needed to make important financial decisions, and you have prepared your family as best as you can.
There are several steps we can take to ensure we are protecting our family for all contingencies, and more importantly, for financial stability in a time of uncertainty:
- Start by organizing important financial and legal documents. It can feel like a burden now, but it’s a vital first action that helps your loved ones access the information they might need quickly. This includes contact information, life insurance plans, investment account statements, household bills, bank account information and more. Don’t forget about workplace benefits, and make sure you’ve identified the best person to reach out to for assistance. A list of key advisors, such as a financial planner, CPA, or personal attorney, can be very useful, as they are usually the first line of assistance for family members in need.
- Make a habit of reviewing your household expenses regularly—either monthly or quarterly. This should be a judgment-free exercise, as it allows you to identify risks and develop a greater awareness of how to achieve your goals. This reviewing habit also helps make the organization step easier and allows your family to run through your finances with ease. Since it’s recommended that you have at least six months of expenses set aside in an emergency fund, you’ll know exactly how much this should be. This will help your family have the financial resources they need for any situation.
- Create contingency plans for scenarios that are of concern to you and your family. My clients’ top concerns often include loss of income due to job loss, injury, illness or death. For each circumstance, create a list of questions with clear responses for how you would advise your family to move forward now, possibly without your input.
- What risk management policies have you set up for your family? It is essential to organize your policies so your family can activate them with ease if needed. These policies can include life insurance, disability income insurance, long term care insurance, auto insurance, homeowners’ insurance and umbrella insurance. To continue paying any mortgages or large debts that may remain if you pass away, it is helpful to have life insurance plans in place for the beneficiaries. Disability income insurance can help cover a portion of your income in the event of illness or injury (this could be physical or cognitive.) It’s also important that you ensure that any beneficiary arrangements line up with your financial liabilities and current wishes.
- Make sure all of your important health care documents are in order, including a health care directive, durable power of attorney and a living will. These will ensure that you are adequately equipping your loved ones who will have to make the decisions to act on your behalf when you are not able to do so yourself. It’s hard to think about, but it gives those you love the ability to act with your best interests, and wishes, in mind.
In this planning process, it’s easy to get stuck in your natural tendencies. Many people dwell on the anxiety associated with the unfortunate event. While it’s overwhelming, try to instill a more positive mindset to create new, productive habits. Set aside the guilt and judgment. Focus your time and energy on the things that you can control. Act to the best of your ability so that you can create positive momentum, not remain stagnant in uncertainty. Build the habits that strengthen your awareness of your current financial picture and allow you to provide readiness for your family.
This is a lot to take in. You might be wondering, what is my next best step? What are three actions that I can take right now? Start small, start smart, and just start. Act now to assemble the gift of peace of mind for when your family will need it the most.