Plan for Financial Speed Bumps on the Road of Life

Our best advice to anyone in any situation is always the same. On one hand, It is easy enough for Heidi’s sons to understand when they were young. On the other hand, it has sophisticated enough to make sense for heads of state. Obviously, we think it is good advice.

It goes like this: Expect the best, but plan for the worst.

As the saying goes, life can come at you fast. Murphy's Law says, "Anything that can possibly go wrong—will!" Sam likes to joke that despite Murphy’s paranoid attitude, he actually was “an optimist.”

When you think about it, job loss, divorce, illness, disability, and accidents quickly can torpedo your finances. The buffer, the moat, is sufficient spare funds set aside for emergencies. What you need is a funding buffer, a savings account that protects you like the bumper on your car.

Do not make assumptions:

Some of you have wealthy parents or family members. You may believe that you will receive an inheritance eventually. 

Unfortunately, "your" money may not reach you if it runs into a roadblock. For example, your inheritance may be only hinted at, implied, or assumed. You could have a "falling out" with a family member. Your parents could remarry and/or live much longer than expected. The money that you were expecting for an inheritance maybe used to pay for your parents’ long-term medical care needs, to pay for estate taxes, or to recover from financial downturns.

Do you know specifically when the inheritance will arrive? Do you know how much might be? In any case, prepare for possible disappointment. Never count on an inheritance. Above all, do not spend it before you get it. (This is a good motto for all expectations.)

Windfalls such as inheritances are not for spending. They are a boost on your quest for financial independence and for creative capital to invest.

"Put your own oxygen mask on first"

You must take care of yourself first, before you can help others. Think about it. You cannot help others if you are in trouble yourself. Just like on an airplane, flight attendants remind us all to, "put your own oxygen mask on first." This well-known phrase is a good way to remember this principle.

                Keep your money safe. You can help protect others with it later, after you have reached your financial goals.

Reduce money stress

Here are some things you may do that can get you stressed about money:

·         Listening to media hype and deceptive advertising

·         Signing up for too many credit cards, debit cards and lines of credit

·         Running up the balances on your credit

·         Consolidating your debt with a disreputable credit counselor

·         Buying a more expensive car, stereo system, wardrobe, etc., than you need

·         Buying a larger home than you can afford

**Money stress can force you to make quick choices that you regret later. Usually, decisions made under stress are not good decisions.

Be happy with fewer things

When you see something you like, ask yourself, "Just because I like it, does that mean that I need to own it?"

If you do not need it, do not buy it. A life of simplicity and freedom from endless material wants can be liberating. An added bonus is that you have simplified your finances and freed up more of your money to invest in things of lasting value.

Develop the habit of saving

Your savings can start small, but the rewards of saving are infinite. Find the inner motivation, the genuine desire to change your life for the better. Energize your commitment by visualizing the improved life that you will have.

Einstein defined insanity as "doing the same thing over and over again and expecting different results." So start doing something different—and learn to hang onto your money!

(Written by Samuel K. Freshman and Heidi Clingen, authors of TheSmartestWay™ to Succeed Series and TheSmartestWay™ to Save—Why You Can’t Hang on to Money and What to Do About It.)