What Risks Do You Face?
March 3, 2014 | Your Finances
Markets rise and fall. Media stories come and go. Emotions intensify and subside. All of these ebbs and flows can affect your financial security in ways that may surprise you.
Perception vs. Reality: Understanding Your Risks
In today’s information-overload environment, it is hard to ignore the buzz all around you. What you hear about the financial markets, the economy, or even what’s going on in your family or neighborhood, contributes to your perception of the world. But it’s important to distinguish between perception and reality, especially with a 24/7 “news” cycle focused as much on the tantalizing and emotional as the credible and factual.
In reality, the risks to your financial security haven’t changed much over the years, though your awareness of them may change with your own experience. The biggest risks are typically life events that can get in the way of your goals, such as accident, illness or disability that impact your income and assets, other financial challenges in life, and premature death that affects your family or others who depend on you.
You need to protect against those risks, but you also need to protect yourself from letting the outside environment influence your thinking without considering your individual circumstances.
Beware of these risky perceptions that misinterpret reality:
- “It won’t happen to me”-In reality, the unexpected can happen to anyone. You need to prevent against risks to your long-term financial security, especially when you have dependents to care for and commitments to meet. At a minimum, protect your income with disability insurance and life insurance. Also be sure to have an emergency fund for unexpected expenses and a plan for handling long-term health care needs if they should arise.
- “The market is moving, I should change my plan”-If you listen to the daily news reports, it can be tempting to respond emotionally to the changing stock market. In fact, doing so is one of the costly mistakes people make with their assets. The investors who achieve the greatest benefit are those who take a long-term view of investing.The only time you should change your long-term approach is if your situation or risk tolerance have changed.
- “I’ll have enough money to retire”-Realistically, you may need to save more for retirement than you realize if you consider your health and health care needs, possible longevity, financial habits, income streams and retirement goals. The best approach is to examine all your potential needs and compare them to your anticipated assets to be sure you know exactly where you stand. A financial representative can help you create a plan, consider different scenarios and decide steps to achieve it.
- “I have a financial security plan, so now I’m done”-It’s good to go through the planning process, determine a direction and move toward it. But with the many stages in life, and changes that happen in families, careers and finances, you need to review your plan on a regular basis to be sure it accurately reflects your situation. Think of this as a continual process to deliver a financially secure future.
- “I can take care of my financial security, I don’t need help”-Even the most financially savvy individuals can benefit from outside perspectives and support to help them create the right plan and identify the financial security vehicles that best suit their needs. A financial professional is a resource, and a conduit to a network of specialists, who can help you answer the key questions, create a lifetime financial security plan and take action to achieve it.