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Planning for the unforeseen that hits your finances

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As I sit here reflecting on this month’s article I try to again think what is important to most of the readership. Perhaps some of you are always looking for that one little nugget of financial information that will make you wealthy without risk. While this sounds a little unrealistic, it nevertheless is what some people are thinking.

Everyone has their own risk tolerance. As we grow older, we typically have less time to make money on long-term investments. An older person may consider all investments short term. Someone in their 20s often has no awareness of short- or long-term differences with investments.

In this hurried society almost everyone procrastinates planning for their financial future. Many under the age of 50 do not have the time in their daily life to plan for something that is not an immediate concern. Others, after seeing a friend or family member face a life-altering situation, will all of a sudden realize they need to better plan for their future.
Financial planning is completely different today than it was for my father. Today, we frequently see market swings in one day that would have taken weeks and been considered catastrophic 40 years ago.

Everyone needs to develop their own personal financial plan. You cannot duplicate the plan of a friend or colleague and expect that it will meet your needs as it does for them. Everyone has family situations that play an important part of their plan.

The main focus of your plan should include not only your financial growth but what will happen with your estate. Some people plan to use their entire financial nest egg during retirement and others want their assets left to family members while they retire on interest and dividends.

For those who take the time to put together a plan with a good financial planner, that plan will normally incorporate family dynamics. Some will have heard the story of the son, at age 21, who inherited his father’s entire retirement nest egg as a result of his premature death. If this son was involved with drugs, the money could easily run out quickly after a lifetime of sacrifice by the father. Just as sad is the daughter who gets the nest egg, marries for a short time only to have the inheritance split in a divorce.

So yes, your financial plan should build wealth with the appropriate amount of risk and time. It should also consider contingencies that we sometimes hesitate to talk about.
Yes, financial plans need frequent review to make sure that “life” gets incorporated into your plan. We should never assume that financial plans are a one-time decision. These plans must get frequent review and discussion so that the end result is what you expect for retirement.

The world is constantly changing and this includes our country. You would never have ever expected to have corporate bonds with General Motors lose their value and that union workers would become partial owners of company assets along with the U.S. government. Recently, several U.S. cities have filed for bankruptcy protection. Unbelievable. Whole cities are unable to pay their debts.

These are tough times for many just to keep a job. Often the equity of the home was considered the mainstay of many personal assets and was a big part of the retirement funds. When home values dropped, the number of people upside-down on their home mortgage has increased dramatically. Many seniors have been forced to go back to work after trying to sell their homes and finding they must come up with money to move into retirement.

Unfortunately, parts of this article are on the negative side. It is important to understand you should get professional help to develop your financial plan and keep it updated. Trying to develop your plan on your own can cause you to miss some important components and proper diversification.

Information in this column is not intended to be specific advice for anyone. You should use the information to help you work with a professional regarding your specific financial objectives.

Capt. Mark A. Cline is a chartered senior financial planner. Comments on this column are welcome at +1-954-764-2929 or through www.clinefinancial.net.

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