Don’t Leave A Change to Chance

3 Jul

Don’t Leave A Change to Chance

The fear of change grips most, if not all, of us at some point in life. Sometimes it can be irrational in nature, but other times it can be well warranted. Regardless of how you approach this notion, one thing is clear: change can and will happen in our lives, but how we adapt or handle a transition is crucial. In managing life’s transitions, dealing with the concept of change can be overwhelming and in some instances, it can create serious challenges. Whether it be starting your a new career, buying a new home, getting married, having a child or owning a business, these life changes require planning to various degrees.

When you start a new job, you may have addressed the obvious items on your checklist, but have you dug a bit deeper on the financial planning end of things? We’ve all done it before; sign on these lines, make the allocations add up to 100% and turn the form in. But just because it’s what mom or dad did, doesn’t mean it’s right for you. A career change is not only a chance for you to forge ahead towards your goals, but you can also begin laying the foundation for a better tomorrow, with slight tweaks to common schools of thought.

Purchasing a new home can cover just about every aspect of the emotional spectrum, but as we saw in 2008, homes aren’t viewed the same anymore in the financial world (at least they shouldn’t be). We all have our opinions as to what may or may not have caused the housing crisis, but the truth is many homeowners treated their home as an asset, and some were punished for continuing that old thought process that the housing market is infallible. Not only should you consider your mortgage and how you might protect others should you pass (ie. life insurance), but you also need to examine the way you manage this instrument while you’re alive. There can be appealing benefits to utilizing your home as an asset, but as we saw nearly 10 years ago, downside risks do come as well.

Getting married is likely one of the biggest decisions you’ll ever have to make in life, but the ramifications from a financial aspect can be just as big. Not only do you need to consider each person’s individual goals, but you always have to be open and forthright. This isn’t an attempt to be a marriage counselor, because I’m not here for that, but I am stressing the importance of financial planning after deciding to tie the knot.

Having a child ties right into marriage, in that you’re introducing a new person into your life that previously wasn’t there. We know all of the challenges this can create, but this is yet another prime example of not letting a change in your life go to chance. When used properly, life insurance can be a vital tool of protection not only for debts (mortgage, car loan, student loan, etc), but also for income replacement. What happens if a spouse that was earning an income dies unexpectedly? Even if both spouses work, that can still be a huge void to fill, even if there is no debt. This is called replacing a paycheck, and while it’s something no one wants to ever think about, the truth is the unexpected does happen. There’s a saying that there is no better time than yesterday to plan, and this is especially true when considering if life insurance might be right for you.

Small business is an integral part of our economy, and if you’re a small business owner, you should never leave anything to chance. Of all the important items to focus on in the day to day operations of a small business, business succession planning is often the most overlooked. According to Robert Frank of CNBC, nearly two-thirds of small businesses do not have a succession plan in place. That’s a staggering number when you take into account how important small businesses are. We don’t want to think about the unexpected, but how would your business deal with an unexpected disability or death? Without a succession plan, the loss of a partner can leave a business at risk for closure or takeover. A properly designed business succession plan can help your business to beat the odds and handle an unexpected event in a much smoother fashion. Whether it’s funding a buy-sell agreement, paying estate taxes and business debt obligations, protecting a surviving spouse from the financial impact of a disability or death, or treating heirs in an equitable fashion to reduce potential family tensions, there are solutions available to help achieve a sound plan.

Many of us rely on family or friends for advice and support in all matters, whether it’s a shift in markets or a lifestyle change similar to those mentioned above. This can create challenges not only emotionally, but also financially. The path towards retirement is not a straight one. Life changes, for good or bad, but it doesn’t have to derail your future. We can help navigate through these transitions in life, while sticking to a plan that was established. Experience and understanding in dealing with these matters helps to focus on the big picture, while not leaving these changes to chance.

 

Adam M. Sutton is the founder and president of Cornerstone Financial Partners. Adam is a financial planning professional, specializing in retirement income planning and wealth optimization strategies. He is a Series 66 licensed Investment Advisor Representative (IAR), as well as life, accident & health insurance licensed and is certified to address long-term care. Cornerstone Financial Partners is a privately held, independent financial planning firm.

Full Disclosure: This information does not constitute investment advice. This article is published and provided for informational purposes only. None of the information contained in the article constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in this article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Cornerstone Financial Partners does not provide legal or tax advice, and the contents of this message are not intended to constitute such advice. Please seek an appropriately licensed individual for legal or tax advice in relation to your individual situation.