About 4 years ago I wrote asking What is Your Financial Plan B ? This queried whether you were ready for when life hands you a ton of feces. I meant financial feces, of course, but what is your plan? As Iron Mike Tyson points out, everyone has a plan, until they get hit.
My definition of Plan B from the original post was:
What is your financial plan B? Plan B, typically is the name given to the steps you must take if your first plan fails, or is in someway derailed. Everyone should at least have a generic Plan B for their finances.
Having a Plan B, and knowing that you need to jump to it, are important parts of your financial life.
What should Plan B include?
- A Will, and Power of Attorney(s) for financial and health decisions, if you don’t have that you really are asking for a mess should the final “change in plans” happens. Yes, it will cost money to get done, but it will make the lives of your loved ones simpler.
- Two to three months of net pay in savings and/or No Debt. If you don’t have debt, then, OK, you don’t need a big “Holy Crap the Sky is Falling” fund, but if you have debts, you had better have a “Holy Sh*t Fund” (I don’t like calling it an Emergency Fund).
- An up to date Resume, with a list of folks that you can use as references, and contact names to send it to, if you need to. Lay offs and such happen a great deal faster than you think they do.
- A list of all financial accounts, including insurance policies, for those who survive you, or who have to take care of your life for a while.
- Not really part of “Plan B” exactly, but, hopefully you had Insurance to make Plan B a little more workable. Life Insurance for the final “change in plans” at least (if you are married and have kids).
Any other Plan B things I am missing?
Hah, the question made me chuckle, in a way that people chuckle when the wheels fall off their Most Excellent Plan B. So back to work, 5 year plan and let’s try that Plan B again. Not really a plan, more of a reboot …
Yes, particularly for small businesses – some sort of backup plan.
I recently put together a couple page document for my spouse that documented the various software packages I use to run our website, information on the servers, userid/passwords, stuff like that. So that if I passed away unexpectedly she can at least hand the book to someone technically literate and she’d be able to continue with the business long enough to do something with it.
Financially, we also have had discussions around a plan B if for some reason retirement income didn’t work out. Gov’t plans don’t generally factor into my plans.
Less so now, but in years past I also had planning around the possibility of a catastrophic jump in interest rates affecting our mortgage combined with a real estate crash.