Sometimes things don’t work out. And we all know it’s important to have a “Plan B” ready in case our first plan falls through.
But developing a real and workable Plan B takes time and effort, and it can be easy to just coast on our current plan if it seems to be working just fine. Unfortunately, this can be risky when:
- Our jobs are not as secure as we think, perhaps due to automation, competition, or product obsolescence
- Our companies are not as financially successful as we believe or are dependent on clients or customers whose fortunes may quickly change
- Our savings rate will only provide for our retirement if we work uninterruptedly until full retirement age
- Our emergency fund is too small to really cover significant emergencies such as long-term disability or extended job loss during another recession
- Our assets are tied up in our houses, leaving us “house-poor” and immobile
- Our household relies upon every adult holding a full-time job
- Our economy can be affected negatively by world events beyond our control
As important as it is to develop a Plan B to cover each of these, and other, scenarios, such a task is hard work! With jobs, families, and other responsibilities, there may not be enough time every day to work on all of these – but it’s important to make a start.
Some possibilities that have worked for others include:
- Develop a side gig (or two) based on skills you have or acquire
- Keep an eye on the economic performance of your industry and keep your resume fresh
- Calculate your retirement savings rate based upon an early retirement age, such as 60
- Increase your emergency fund to cover larger emergencies, perhaps equal to even a year or two of basic living expenses
- Follow Thomas Stanley’s guideline to keep only 25% of your assets maximum in real estate, with the rest more accessible
- Rent (rather than buy) a home if your monthly housing costs will be lower (considering all home-ownership costs, including principal, interest, taxes, insurance, PMI, maintenance, repairs, extra utilities, extra commuting if farther away from your job, extra furnishings, etc.)
- Develop a budget that allows you to live well below your means, and if there are two earners, consider living on one salary and saving the second
- Solidify your bonds with your family, friends, and community to ensure a solid social safety net beyond what government may provide
- Know that you can’t control world events, but avoid overly-risky investments
Regardless of the choices you make in protecting your financial future, diversifying your risk in this uncertain world can help you sleep at night and weather any future financial storms.
So what’ s your Plan B?
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