FINANCIAL FOCUS: Are you prepared for the unexpected?

Joe Faulk

Joe Faulk

Published: Wednesday, December 11, 2013 at 09:58 AM.

When you’re working to achieve your financial objectives, you will encounter obstacles.

Some of these can be anticipated; for example, you won’t be able to invest as much as you want for retirement because you have to pay your mortgage.

Other challenges come unexpectedly, but you can still plan for them. 

For example, during your working years, be prepared for the following:

Emergency expenses: Could you pay for a major, necessary car or home repair? What about a temporary job loss? These events are costly — especially if you have to dip into your long-term investments to pay for them. To help guard against these threats, try to build an emergency fund containing six to 12 months’ living expenses, held in a liquid, low-risk account.

Investment risk and market volatility: Extreme price swings are unpredictable and can affect your investment success. To defend against wild market gyrations, build a diversified portfolio containing quality investments. While diversification alone can’t protect against loss or guarantee profits, it can help reduce the effect of volatility on your portfolio. Maintain a long-term perspective. By doing so, you won’t be tempted to overreact to short-term downturns.

Long-term disability: One-third of people ages 30-64 will become disabled at some point, according to the Health Insurance Association of America. Disabilities can be economically devastating. As part of your benefits package, your employer may offer some disability insurance, but you may need to supplement it with private coverage.

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