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BE PREPARED FOR LIFE’S CHANGING FINANCIAL SEASONS

Seasons

Ahh, winter. It’s arrived and as usual, I’m woefully unprepared. It’s silly, really, and I have no excuse. I’ve lived most of my life in a northern, winter climate, so it’s never a surprise that snow and frigid temperatures are on their way. Each year, I have plenty of time to get ready.

My lack of planning was top of mind this past week, as I navigated winter’s first storm. I failed miserably in my attempt to get to work in a timely fashion. Note to self, the first major snowfall doesn’t add 15 minutes to the drive, it adds an hour.

The daily commute was only one example of my lack of preparedness.

When the temperatures plunged, I couldn’t locate my winter coat. A few days of trying to recall where I could possibly have left it last March led me to the coat closet at my office. I guess that’s where I’d abandoned it during an unseasonably warm spring day six months ago. 🙂

Some good news, I found my gloves today, a week after the storm rolled in. My toque? Still searching. I did have my scraper/brush handy, so no need to use my credit card to clear the car window this year.

Seasons

Why so unprepared?

My best guess is that it’s my unconscious, desperate attempt to cling to the vestiges of summer or autumn. Perhaps there’s a level of denial; the longer I leave things, the longer winter will stay away. Regardless, it’s arrived and I must face it head on.

THE CHANGING FINANCIAL SEASONS

Just as within nature, we also experience changing financial seasons throughout our lives. We tend to place most of our focus on the ‘big’ ones; marriage, home ownership, raising a family, saving for kids education, and eventually retirement and estate planning, though not necessarily all of them, or in that order.

These ‘seasons’ are ones we often see coming well in advance, and take plenty of time to plan for, with varying degrees of success.

But we also experience many other financial seasons, often unexpectedly. Some can last for as little as a few weeks, or as long as several years. Here are a few examples:

  • shifting from dual to single income
  • loss of employment
  • work relocation/transfer
  • support of aging parents
  • change of career
  • kids leaving home/empty nest
  • starting a business/self employment
  • separation/divorce
  • dealing with family illness
  • furthering education/retraining

I could list more, but you get the picture. Perhaps you’ve had to deal with a number of these seasons, good or bad.

Inspired by my perennial lack of winter preparation, I’ve come up with some ways to ensure you’re ready for life’s many changing financial seasons, big or small:

Establish an emergency savings fund.

There are different schools of thought on the amount of money one should set aside for emergencies. To me, the most important thing is that you have one, period. So if you haven’t begun, even saving $1-$2000 will help you get through several unexpected financial changes. Once you’ve got a basic fund in place, build from there through an automated savings plan.  I will note that the ideal size of your emergency fund will depend on your life situation. If you are twenty five, single, and rent an apartment, you likely won’t require the same stash as someone who’s married, with three kids, two cars and a mortgage.

Avoid excessive debt levels.

Preparation requires foresight. In other words, avoid taking on financial obligations that will make life more difficult in the future. If you haven’t already sprung for that fancy new house and accompanying massive mortgage, or bought that brand new luxury SUV, don’t. Trust me, both of these purchases are very difficult to free yourself from if circumstances suddenly change. Always keep your options open. Taking the plunge on a fancy house or vehicle will hamper your financial flexibility.

Get rid of consumer/credit card debt.

Perhaps you’ve already got a bunch of consumer debt. This is the stuff that usually accumulates from keeping up with the Joneses, and not living within your means. Whether it’s high interest credit cards, retail financing loans, or a line of credit from your bank, these products make it very difficult to manage through life’s changing financial seasons.

The best time to start crushing your debt was yesterday. Take whatever steps necessary.

I strongly recommend that you begin by eliminating all revolving credit, by consolidating into a term loan.  If you must, keep one credit card open with as small a limit as is required. Even if the interest rates are reasonable, revolving debt is tough to payoff. It’s far too easy to make payments, only to reuse the credit.

Wherever you can, plan in advance for changes to your income.

We experienced this in the past year. Mrs. Mystery Money left her part-time job of five years to be at home full time with our kids. She had taken the job when our youngest started school, but over the past couple of years we both felt life was getting too hectic and that our kids would be better off with her being at home. Thankfully, we hadn’t made the very common mistake of falling into lifestyle inflation while our income was higher. We didn’t buy a bigger home, or take expensive vacations. That being said, there were areas where we had gotten lazy with our discretionary spending.

My wife planned her work departure about six months in advance as we had to reduce our monthly expenses by $1000, her approximate net income.  Were we spending her entire pay check?  No, but we wanted to maintain the same buffer after she left her job.  We were able make it happen, and we definitely benefitted from the preparation time.

Perhaps you’re in the opposite position and are expecting a significant increase to your income. This is something that you should also be prepared for. If you get a large raise at work, or your spouse enters the workforce, you are moving into a new financial season. It’s a great opportunity to accelerate your savings and plan for the future! As I alluded to earlier however, make sure you steer clear of lifestyle inflation!  Look for ways to increase your savings rate, and get those extra dollars working for you!

Most important, plan ahead!

Don’t be like me and winter. Don’t bury your head in the snow sand. It’s true that you can’t prepare for everything in life, but you can certainly try!  Always keep an eye on the horizon, looking ahead one year, or three. Ask yourself, what do I want my life to look like, and what do I need to do to get there.  What opportunities and related expenses do I foresee in the coming year? Consider the things that are most important to you.  Your priorities will change over time.  Don’t be afraid to cut out commitments that no longer make sense, just because you’ve done them for years, or because others expect you to.  Sit down with your spouse/partner, and set some short term and long term goals.  Make sure the two of you are on the same page.

Life is full of changing seasons and your finances play a key role. Trust me, it’s best to be prepared.

Comments 8

  1. As usual, thanks for a well thought out and thought provoking post. Mr. Frugal PhD and I expect to transition into new jobs in the next year or so. We don’t know what–or where–is in store for us yet, but we’re trying to plan for those not yet defined changes by bulking up our savings. It’s difficult when you don’t have a clear vision of what the next phase or season might bring, but your post is a good reminder that there will be change, regardless of whether you’re prepared for it. So best prepare for as many possibilities as you can. Preparation can put you in a position to say “yes” to an unexpected opportunity.

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      Hey Amanda! I love how you put it, “preparation can put you in a position to say yes to an unexpected opportunity”, it sums it up so nicely. I look forward to hearing more about your next move as it unfolds!

  2. Excellent topic. I feel like this message is finally starting to sink in for me. Maybe because I have made a little progress, maybe because I have just gotten to the point where the clock has started to run down on all those dreams for “someday. ” 2017 will be the year where we finally make a dent on saving to plan for the things that are important, the things we dream of, and for the security that we need.

    Also, not your intent obviously, but I am jealous you have had your first storm. I pine for snow!

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      Author

      Hey Linda, that’s encouraging for me to hear, the progress you’re making. We fight the same battle, making that savings dent, and gaining that freedom!
      As far as the snow, I do love it up until the New Year, but what you aren’t missing is the below zero temperatures we’ve endured for the past week. 😬

  3. Preparation is the main ingredient for success. Whether you’re talking personal finances, professional sports, or something in between, prep work can’t be ignored if you’re going to succeed.

    Love the analogy of the seasons!

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  4. One of the great pieces of advice my pastor friend gave to me right before I was married was, see your life in seasons. Each season with your wife will be a new adventure through success and challenge. Don’t think one season will last forever, because they will always be changing. And the people in successful marriages will learn to work together and plan for the upcoming seasons together. You just made me realize that we should see our financial lives in a similar fashion. Plan ahead, and enjoy living through each season as it comes.

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