Last post focused on retirement so this post will focus on your oft ignored years prior reaching retirement. To begin, consider the following: “most people put all of their financial planning efforts towards preparing themselves for 30-50 years of unemployment in the distant future, yet, would be unable to sustain 2-3 years of unemployment in the near future.” Accurate? Yes? No? Maybe? How about spot on.
I’ve found that most individuals who care enough about the financial future to put some effort into planning for it focus solely on retirement and how they can save enough to reach their retirement goals. What is commonly missed is that your retirement, and by extension saving towards your retirement, is solely dependent on your ability to earn an income during the years prior to retiring. If your financial plan ignores events such as the possibility of prolonged periods of unemployment or the unexpected loss of an income earner prior to retiring you may want to put some more time into it.
The point that I am trying to make here is that, similar to most things in life, before we can run across the financial planning finish line, we need to start the race meaning that your financial plan must first address the multitude of risks you face during your pre-retirement years before you can jump straight to deciding your first retirement vacation destination. (Since we’re all aboard the metaphor train now I’ve attached a financial planning pyramid below – notice that you can’t build the top without first constructing a base :).
