Over the last few weeks we have been looking at personal financial planning over four typical stages of life. In addition, we considered specific life circumstances.
This article considers further the unpredictability of life events – circumstances that just come along, causing us to adapt our otherwise on-target financial plans. It acknowledges that even the best-laid financial plans still require flexibility in responding to life events as they unfold.
Take for example Thomas and Mary, a couple now in their mid-60s who have successfully raised their two children right through graduate school and into well paying jobs. Their retirement plans have gone just as they had planned. Then, unexpectedly, one daughter loses her lucrative position and finds it hard to find another job.
This daughter remains out of a job so long that eventually Thomas and Mary find themselves back at the stage of providing supplemental financial support to their daughter and her young family. This situation distorts Thomas’ and Mary’s original financial plan and forces them to make a detail review.
The second example is Patricia, who had a financial plan that would allow her to retire at 60 years old. However, she finds herself laid off from her job just as she reached 53 years old. It takes her three years to find another job which could help to get her back on track. She will just need to work an extra six years, until age 66 instead, in order to be in the position she had originally planned.
Then, there is Samantha who returns from specialized studies on scholarship. However, there are no job openings in her area of expertise, genetics. She is forced to consider and to plan the opening of her own business. She now requires both personal financial planning and enterprise accounting and financial planning.
Another example is Philip, who has had a very successful professional career, retiring comfortably at 56 years old. Within two years of retirement, Philip loses his wife and life partner to breast cancer. Then, way beyond Philip’s wildest dreams, he finds himself madly in love and marrying a younger woman when he is 62 years old. His new wife brings three university-aged children with her. Philip has two grown children of his own who are living successful and independent lives. Yet Philip’s previously planned retirement and estate then needs to be replanned.
Finally, Mary and Heather were dear friends all their lives. They went to school together, to university together, and even got married the same year. Having shared many secrets, they feel an inextricable bond.
Mary finds herself stricken with an illness that wipes away virtually all her financial resources, yet more funding is required. Heather, in spite of her commitment to keep on course with the financial plan agreed with her spouse, is torn by her desire to assist Mary with the overwhelming medical expenses. Her loyalty to her friend wins out and Heather’s family financial plan goes awry.
From these examples, we see that it is important and useful to prepare a financial plan, recognizing the typical stages as they occur. Yet it is also important to recognize that life is not linear. No matter how much we plan, we must make allowances for life’s events.
The overall exercise therefore remains quite complicated, especially in today’s unreliable and risky investment environment where it is possible to invest your saving in good faith and lose part or all the capital on maturity.
• Louise Fairsave is a personal financial management advisor, providing practical counsel on money and estate matters. Her advice is general in nature; readers should seek personal counsel about their specific circumstances..
