The Sun Doesn’t Always Shine

We now have a solar roof and it takes care of our electrical needs on sunny days but the sun doesn’t always shine. At night, our panels rest. During storms and very cloudy days, the panels aren’t at peak efficiency.

Yet when it comes to personal finances, I generally come across people whose planning assumes that the sun will always shine.

Many of these people are do it yourselfers where one partner in a couple handles the finances and does it well. But what happens when that person gets too busy or injured or sick or passes away?

What about when old age and diminished mental capacity don’t permit them to perform in the way they’d like?

What happens to a couple who are living together for many years when the storms finally roll in?

Not long ago, someone asked me what happens if the bull market ends? Will the stock market go down?

I told him the question is wrong. We know the market always goes up and down.

The long-term trend for a century has been up but we know the market will go down and we need to plan for that.

We enjoy the sunshine and warm weather, the lazy days of summer. But we don’t throw out our umbrellas and raincoats and keep our flashlights handy.

We know that the sun doesn’t always shine and we always need to keep in mind the possibility of stormy days ahead and prepare accordingly.

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Contingency Plans

The Sun Doesn’t Always Shine
We now have a solar roof and it takes care of our electrical needs on sunny days but the sun doesn’t always shine. At night, our panels rest. During storms and very cloudy days, the panels aren’t at peak efficiency.

Yet when it comes to personal finances, I generally come across people whose planning assumes that the sun will always shine.

Many of these people are do it your selfers where one partner in a couple handles the finances and does it well. But what happens when that person gets too busy or injured or sick or passes away.

What about when old age and diminished mental capacity don’t permit them to perform in the way they’d like. What happens to a couple who are living together for many years when the storms finally roll in?

Not long ago, someone asked me what happens if the bull market ends? Will the stock market go down?

I told him the question is wrong. We know the market always goes up and down. The long-term trend for a century has been up but we know the market will go down and we need to plan for that.

We enjoy the sunshine and warm weather, the lazy days of summer. But we don’t throw out our umbrellas and raincoats and keep our flashlights handy. We know that the sun doesn’t always shine and we always need to keep in mind the possibility of stormy days ahead and prepare accordingly.

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Aging and Financial Skills

 

Diminished Ability to Handle Personal Finances

As people age, they gradually lose their ability to handle their own finances. Often, this process is so gradual that the person himself and those around him are unaware of what’s happening until something serious happens. The elderly control the most assets and are the most susceptible to financial scams and poor choices. As people get older, their financial affairs often get more complex. They must deal with complex choices on healthcare, long-term care, taxes, life insurance, pensions, Social Security and estate planning. Often just handling the routine chores of daily financial affairs become beyond reach. Recently The New York Times had an article discussing the research behind the loss of cognitive skills needed for personal finance. Steps to mitigate these inevitable problems include striving to simplify your financial affairs — consolidating your holdings in a small number of financial institutions, trimming your actual number of holdings, avoiding complex or exotic instruments. Another common solution is to use automatic bill paying where possible. People should also find trusted family members, friends or professionals who can step in when needed. Appropriate advanced directives such as powers of attorney and health care proxies also need to be in place. Planning for the inevitable will help avoid many of the worst potential pitfalls.

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Scams for Elderly

Protecting Against Financial Scams

Financial scams are getting much more sophisticated and are a growing problem. It’s easy for anyone to momentarily let down their guard and get nailed. It’s especially easy for the elderly. So much has changed in recent years and the elderly often have a tough time sorting out the legitimate advances from the smooth talking con artists. A recent study showed that the elderly who have been working with a financial advisor or some other trusted advisor are much less likely to fall victim to scams. Financial products have gotten much more complicated over the years. With the advent of cheap computing power it became possible to add many more features to products. Now consumers have choice about everything but it’s much more difficult to sort out what is really important to them, what they need and what they are paying for. As we age, our brains become less agile and can get overwhelmed with this growing complexity. Nowadays, everything comes with an inch thick instruction manual. While there’s no sure way to ward off all scams, the one good rule is that if something sounds too good to be true, be especially wary.  Recently, Financial Planning Magazine ran an article on protecting against scams: http://www.financial-planning.com/30-days-30-ways/protecting-elderly-clients-more-scams-2692756-1.html?utm_campaign=30%20days%2030%20ways-may%202%202015&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae4297713%3A1591a%3A&st=email

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