We have seen some very disturbing and destructive hurricanes and earthquakes in the last month which makes me feel very lucky that we live in the Great Lakes area. Not to say that we have not seen flooding or tornadoes in our recent past, but not like the disasters that many are dealing with now. I could not imagine dealing with the losses of so many people.
These events make me ponder about the ways that we can prepare for natural disasters, both big and small. In our area, we should always be able to be self-sufficient for several days (ie. flashlights, generators, candles, water, cash money in case no ATM’s are available …and the list goes on).
In the case of a hurricane, it’s a much different story. First, you need to have a home built to hurricane standards, the ability to batten down the hatches and have that plan to be self-sufficient for much longer than several days. I should also include a high priority of having a plan to leave for personal safety, knowing that what you have done to prepare should allow you to ride out the storm.
The next thought is the complacency of not planning for these events. In some ways, you can compare it to investing and planning. Many, many times I see that the longer the period between negative events in the markets, that the memory fades and people forget about the emotional rollercoaster of long-term investment planning.
Market corrections happen every several years, and we have not had one in quite some time as we’ve been in a Bull Market for the past 8 years. This is the preparation kit in general that we follow in order to remain prepared:
- have an emergency fund of 3 to 6 months income
- revisit your goals – both short and long-term
- revisit your asset allocation model after completing a risk assessment tool with an honest review of taste for risk.
Don’t be afraid to ask your advisor to go through this process to make sure that your financial house is ready for the small and big storms that will always happen as we go through life.
Our biggest rule of thumb is to always be prepared for multiple outcomes. Now is the time to check your complacency barometer and get prepared.
Warm regards,
Tim