{"id":13864,"date":"2022-08-30T14:58:14","date_gmt":"2022-08-30T19:58:14","guid":{"rendered":"https:\/\/johnsonwim.com\/?p=13864"},"modified":"2022-08-30T15:25:05","modified_gmt":"2022-08-30T20:25:05","slug":"prepare-your-finances-for-the-unknowns","status":"publish","type":"post","link":"https:\/\/johnsonwim.com\/prepare-your-finances-for-the-unknowns","title":{"rendered":"Prepare Your Finances for the Unknowns"},"content":{"rendered":"
What’s the secret to a more successful retirement? Making the unknowns known.\u00a0<\/strong><\/p>\n \u201cThere are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don\u2019t know. But there are also unknown unknowns. There are things we don\u2019t know we don\u2019t know.\u201d<\/strong> \u2013 Donald Rumsfeld<\/strong><\/p><\/blockquote>\n One of the most important things to remember when your financial circumstances are in flux, is that it’s impossible to predict when or how the next market correction will occur. It could happen in a few weeks, months, or it could happen in a few years. When these things happen it affects everyone. It doesn’t matter if you’re a young millennial, an older baby boomer, or somewhere in between.<\/span><\/p>\n What does all this mean? Simply put, you should take the proper steps to be more prepared for whatever the current state of affairs is. Here’s a look at some ways you can practice preparedness for when financial uncertainty occurs.<\/span><\/p>\n Even if you feel like you have enough money to navigate the unknown, it can’t hurt to have more cash on hand. Cash is a valuable asset because it gives you flexibility and peace of mind. If there’s a large, unexpected expense, you may not need to take out a loan. If you’re out of work for a year, you may not need to sell your home.<\/span><\/p>\n That said, having too much cash can also be dangerous\u2014you might miss out on investment opportunities or get stuck with an interest-only mortgage.<\/span><\/p>\n There are two main reasons to keep cash: retirement, and unexpected expenses.<\/span><\/p>\n Plans that don’t bend ultimately break. Adding more conservative assumptions to a financial plan helps provide cushion against unknowns. Which is why flexibility is a great asset to have, both in your personal and professional life. It can help individuals adapt to changing circumstances and can minimize the disruption in your life.<\/span><\/p>\n Spending money is pretty much inevitable. And while there are many thoughts on how much you should have saved at every age, the race to build wealth can make it hard to focus on the here and now. This is why it\u2019s important to have some financial flexibility. Having financial flexibility doesn\u2019t mean loosening the reins and throwing caution to the wind when it comes to your money. It means striking a healthy balance between planning for today and the future.<\/span><\/span><\/p>\n In general, high fixed expenses relative to your overall income limits your ability to adapt as your investments, goals, or finances change. And during periods of high inflation or market volatility, the negative effects of over-spending are magnified. <\/span>A strong savings rate relative to your income can help you build reserves before retirement\u2014and during retirement. Remember that life is uncertain and good planning should account for that. Know what direction you want to head in, save money and give yourself the benefit of having options when there is a fork in the road.<\/span><\/p>\n As you work to help secure your retirement, you’ll need to help ensure your plans are flexible enough to account for the unexpected, and many investors didn’t see a bear market coming.<\/span><\/p>\nKeeping Cash at Hand<\/b><\/h4>\n
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Having Financial Flexibility During Periods of Financial Stress<\/b><\/h4>\n
Test Your Financial Plan Against Bear Markets<\/b><\/h4>\n