Planning for the “What ifs”
For most of us, it’s natural to spend at least some time worrying about “what if” scenarios.
What if investment returns are lower and inflation is higher than expected?
What if I have an illness that requires an extended stay in a skilled nursing facility?
What if tax rates rise or Social Security retirement benefits change in some way?
With so much at stake (your financial security!), it’s easy to become paralyzed by fear and anxiety when it comes to financial uncertainty.
While we consider ourselves generally optimistic people, we have discovered that evaluating these “What if?” scenarios in the context of a person’s financial plan can be extremely reassuring.
Using cash flow projections, we have found that it is possible to effectively “simulate” these unforeseen financial emergencies or unknowns to determine their impact.
Why plan for negative scenarios?
So why is it helpful to discuss and plan for these negative and downright pessimistic financial possibilities? The answer to this question depends on who you ask:
From our perspective, we believe that by stress-testing and addressing some of the things that can go wrong, we can reduce the potential financial impact of the event should it occur. In doing so, we can help increase the odds that our clients stay the course and ultimately achieve their financial goals.
From our client’s perspective, by proactively discussing and anticipating negative financial outcomes, clients are able to approach financial uncertainty with a sense of confidence and peace of mind.
The fear of uncertainty can prevent you from doing things you really want to do!
If you had the confidence that your asset base could withstand most “what if” scenarios, would you approach life differently? Would you take more trips, contribute more to charity or make more meaningful gifts to family members? We believe most people would feel empowered and take actions that would enhance their life, as well as the lives of others.
It is our hope that in the days and months ahead, as financial uncertainty inevitably arises, that you will find confidence in knowing that together, we have explored these “what if” scenarios and that you will continue to embark on a life that is most fulfilling. Happy New Year!
The Beacon Financial Strategies Team