Preparing for Hibernation - Financial Planning

As the autumn air starts to chill, the ground squirrel readies herself for hibernation. She has a few final nibbles of green grass before burrowing underground where she will rest for a number of months. We can learn a few valuable things from the ground squirrel.

WINTER IS COMING

We often spend our time and energy preparing for the future that we want to build – and this is an important thing, however, we also need to admit that this condition we call ‘being human’ comes with plenty of curveballs.

The key lesson about preparing for unforeseen circumstances is that solutions need to come before problems. The nature of that which is unforeseen is that it will be too late to do anything proactive about it once it has occurred. Even while there is very little to go around, we should strive to set aside a little of that little in order to make any big problems in the future little.

FINANCIAL HEALTH CHECK

A financial health check involves candidly asking yourself a few questions about how you are prepared financially for certain things that could go wrong.

A few practical questions to explore are:

• What if my spouse or I lose work for a few months?

• What if one of our everyday goods gets damaged (e.g., car or geyser)?

• What if we have a medical emergency?

• What if my salary doesn’t last until the end of the month?

If any of these questions caused any financial anxiety, there are cures you can set in place.

AUTOMATE AND WAIT

The best financial decisions are the ones we don’t have to regularly review or amend for them to be successful. Luckily the tools exist for us to make once off decisions that automatically continue, here are a few:

• Set up a monthly debit order for your investments.

• Set your credit card repayments to the maximum i.e., to fully settle every month.

• Get comprehensive insurance where you need it.

The value of our financial decisions rarely shows up in the month, year, or even decade that we make the decisions. Patience is virtue we need here. By automating our finances, we need only be motivated once (when we initiate the decisions) and can continue to reap the rewards of that decision.

SOME FAT IS USEFUL

The old adage is rather have it and not need it, than need it and not have it. Giving ourselves a little bit of cushion in our financial decisions is useful, after all we tend to underestimate the cost of things. Anyone who has bought/built a house, retired, travelled, or moved to a new city will tell you that their budget was too prudent, “we forgot about the cost of…” will no doubt be said.

As you build your financial goals, giving yourself some margin for error will be a great service to your future self.

An area where some fat is useful is budgeting. We forget about all the areas we spent money. By automating our savings (as noted above), we can ensure that our future doesn’t take the burden created by any oversight.

IF YOU NEED GUIDANCE IN PREPARATION FOR YOUR HIBERNATION, CLICK HERE TO CONTACT A GIB FINANCIAL PLANNER.