Ready for the “what-ifs” of life?

If you’re in the middle stages of your career and also busy with family responsibilities, you’re taking care of a lot of things today. But what about tomorrow? Some unexpected future events could upset your progress toward your financial goals. What are these events? And how can you prepare for them?
Generally speaking, these events fall into the following categories, covering both financial and personal issues:
If you were faced with a large, unexpected expense, such as a major home repair, or you encountered a gap in employment, would you be financially prepared? If you weren’t, you might be forced to dip into your long-term investments, thereby affecting your financial future. In addition to taxes and penalties resulting from the sale of these investments, you may also be faced with selling them when their value is down.
To help prevent this scenario or to avoid taking on high-rate debt, you should build an emergency fund containing three to six months’ worth of living expenses, with the money kept in a liquid, low-risk account. Some possibilities for your emergency fund include savings and money market accounts. Importantly, you’ll want to make sure that your emergency fund is separate from any account you use for your everyday expenses. To supplement your emergency fund, you might also consider opening a personal or home equity line of credit. You’ll want to only use a credit line if absolutely necessary, but it may be a better option than taking out other types of loans.
While having the three to six months’ cash cushion can help you stay on track toward your goals should the unexpected happen, holding too much cash can detract from your ability to fund your long-term investments, which are needed to help you achieve a comfortable retirement, along with other objectives. Also, in an inflationary environment, holding too much cash leaves you susceptible to a greater loss of purchasing power as compared to putting money away into growth-oriented investments.
Actually, market volatility probably should not be considered an “unexpected” event because it’s a normal part of investing. Because you’ve already been an investor for a while, you know that the financial markets will always go through ups and downs. Still, the downturns, while not necessarily unexpected, can be unsettling. However, you can take steps to prepare for them:
For many years, inflation was quite tame. But it reached a 40-year high in 2022, and though it may subside somewhat in 2023, it’s still an issue of which you should be cognizant. In particular, inflation may affect your ability to save, which is why it’s important to revisit your budget in inflationary periods to see if you can find adjustments that can free up money for your savings and investments. And your financial advisor can illustrate various scenarios that can give you some flexibility in accommodating inflation in your financial strategy. For example, these illustrations can show the impact of saving less today but more in the future, or how changes in your retirement goals, in regard to timing and the amount of money you’ll need, can affect your saving and investment moves.
A serious illness or injury could cause you to miss significant amounts of work. If this happens, how could you make up for the lost income? Your employer may offer a short-term disability plan, but it might be inadequate in terms of duration and amount of coverage, so you may want to consider adding a long-term disability policy. Ideally, you’d like to replace as much of your after-tax income as possible.
If you unexpectedly passed away, what impact would it have on your family members? Could they stay in the same house? What about your child’s education expenses? Of course, no one can predict the future, which is why it is so important to maintain adequate life insurance. Your employer may offer a group policy, which can be helpful, but it might not be sufficient. The amount and type of coverage you need depends on a variety of factors, including your age, liabilities, income, final expenses, children’s education and other goals. Making sure you have enough coverage is probably the single most important thing you can do to protect your family.
Your financial advisor can help you create a comprehensive strategy that can prepare you for many of the “what-ifs” in the future, whether they relate to your investment or protection needs. Life is full of possible surprises, but when you’ve got the right guidance and assistance, you can be ready for just about anything.
Important Information:
Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P., and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.