The events of this past week should serve as good reminder to all of us that no matter what you do every day, we face risks beyond our control. However small the risk may be there is no way to ensure that you avoid falling victim to these types of events. Not that we should live our lives in constant fear – we should just prepare for the worst and then feel very fortunate should we end up living long and healthy lives.
Preparing for the worst doesn’t just mean acknowledging that life is fragile and then living life to its fullest. You need to prepare for such risks financially. This means assessing your exposure to risks beyond your control and then getting protection if you need it. If anyone relies on your life and/or your income stream, then you need to have insurance policies to replace that income if you suddenly die or face a long-term disability that prevents you from working. (Read my colleague’s post on how to determine if you need life insurance.) You need cash reserves that you can draw from immediately in an emergency. You need proper home-owners insurance. You need an estate plan that allows your finances to pass to your heirs smoothly and at a low cost. (Read our director of trust’s stance on the importance of an estate plan).
This preparation won’t prevent you from being in the wrong place at the wrong time (and none such preparation exists), but it will help prevent financial risks from being created for your family and heirs should something happen to you.
Recent volatility in financial markets also serves as reminder that risk is also everywhere in the investment world. We believe the best way to protect yourself from investment risk is to construct a diversified portfolio with an asset allocation that fits you, and then stick with it. Go about your daily life knowing that your investment assets can decline at any point due to reasons beyond your control but know that your investment allocation fits you and over time it will help you meet your financial goals. The same goes for health risks – go about your daily life knowing that your health may fail or your life end short but know that you have made preparations that will help care for your family in your absence.
And then enjoy the ride every bit along the way while we still can!
Travis Boyer, CFA, CFP®
Senior Financial Advisor