A Reminder to Hope for the Best and Prepare for the Worst
Rereading the article I wrote a year and a half ago, Looking Ahead to 2020 Hindsight, the one thing that became abundantly clear was that I had no idea this pandemic would last as long as it did! It seemed like common sense to band together as global citizens and stay home, mask up and do whatever was needed for the good of your neighbor. Well, we all know what happened next. We also have rising inflation that will have an impact on our finances, ability to save and comfort level to retire. We’re still living with the uncertainty of what the world will look like when it goes back to some version of normal, and what to do in the meantime.
At the same time, my article’s advice still holds. I reminded you to think about what has made this now nearly two years since the start of the pandemic difficult, and what you wish you might have done differently. Send yourself a note (after the chaos has calmed down) so you can address each item to prepare yourself for the next time. While again, I’m seriously hoping there won’t be another pandemic, this is just a way of preparing for the worst.
I had mentioned some scenarios where you can develop not only good money habits like building up your emergency fund or developing new skills for a side hustle, but also personal habits such as making a deliberate effort to connect with friends and family. As you create your list, come up with either a way to correct the deficiency or devise a plan B. For example, if you’ve experienced power outages, you could either buy a generator or have a backup plan where you know where you could stay until the power comes back on.
For our clients, our financial planning software always includes a pessimistic scenario. I describe it as when everything goes wrong—everything costs more, your expected returns are less and if you are selling a house or receiving income, you’re getting less than you hoped. This is absolutely planning for the worst. Then if your plan still works in this pessimistic scenario, you can feel confident your plan can withstand whatever may come your way. Since inflation is a big concern now, that’s part of the ‘everything costs more’ we are looking at.
I believe that tackling what concerns you, either the list of ‘what I wish I did’ to projecting out your worst case, most pessimistic scenarios, is the best way to feel less stressed and more in control during these times of uncertainty. It takes a little work, but it will be worth the effort. Hoping for the best for you in 2022!