How to build a money backup plan that works

How to build a money backup plan that works

Vanessa Stoykov

If there is one thing COVID19 has taught us, it is that life can change at any time, for reasons you can’t control. What you can do however, is prepare yourself as best possible ahead of time. This is why it is important not only to have a money plan, which is your plan A, but also to have a plan B, just in case. 

So what does this mean practically? Well for a start, it calls for flexibility in your thinking. This is something not everyone finds easy to do- once you have a plan in mind, it can be quite hard to divert it and do things differently. Flexible thinking might have you develop a plan B for a number of aspects of your life. These might include where you live, where you send your kids to school, what car you drive, what job you do, or any other big life changes that ultimately improve your financial situation if a plan B is needed.

And this may not just because of an event like a pandemic. There could be changes with your health, you could lose your job, or interest rates may go up and make the mortgage a lot harder to pay. Rather than worrying about the doom or gloom, a few changes to your life plan, that are already discussed and known, will help you develop your plan B.

For example, if you know your school fee amount combined for all kids, until they graduate, you will have a lump sum number you have to plan for. Knowing this could be cut, and where else your kids could go if needed, would be a great back up plan on paying school fees if it becomes too much over the longer term. And it is always better to call on a plan B before disaster really hits, then wait, and deal with a much bigger problem afterward. 

As soon as you know something might be very challenging that is in your plan A, start thinking of a timeline for plan B. Don’t wait – rather start the process of change so it disrupts you and your family as little as possible. 

The other component that is critical for your backup plan is money (cash) in savings. The saying cash is king is certainly true when it comes to changing your life. And while many experts say it is good to have six months in savings ( and that is certainly true) that number for many is a challenging exercise while still paying for the day to day.

Rather, having 3 months back up money to pay for life is a more realistic goal. That way, if you have to execute plan B you are buying yourself some time, and some peace of mind to do it.

Many of you won’t have a plan A structured and agreed upon in your life. Of course, it is critical to have your plan A, before you can do plan B. So start today. What are your locked in expenses? Where are you going? Where do you want to live? How do you want to retire? Knowing the answers to these questions is the first step in developing your life/money plan. Then you can start on a plan B that works. 

Remember, putting time and thinking into you, what you want from life, and for your family is one of the greatest investments you will ever make. 

Until next time.

The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. This information is general in nature and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. To view our full terms and conditions, click here.

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