It’s impossible to be completely prepared for the unexpected. After all, if you could anticipate what you might need in an unexpected situation, it wouldn’t be unexpected. Yet, we all have to be prepared to some degree, in case of an abrupt change in the world.
As much as it would make things easier, life does not stick to a script.
Sometimes our plans and expectations are thrown off in minor ways. Other times, such as recently, major changes can derail practically all aspects of life. These circumstances can be especially troubling when trying to financially plan for the long term.
For many people who live paycheck to paycheck—or those who only have a small amount of savings set aside in case of disaster—a massive disruption can turn their whole world upside down.
Recently, I saw on Fox Business that a Bankrate survey found 30% of American adults have seen their household income decrease during the pandemic. Even worse, 19% of American adults now have less emergency savings, and 24% have no emergency savings at all.
The survey went beyond just individual households and showed the impact the current crisis has had on households as a whole across the country. Of American households, 26% have added debt, and 11% have decreased their savings. Even individuals who have managed to mostly insulate themselves from the recent catastrophe can see the importance of developing a financial safety net.
The case for a monetary emergency kit has been plainly stated in the starkest manner.
The fact is, sometimes major changes can occur and leave everyone blindsided. When you are planning for the future of your household and family, limiting your financial protection to one single asset can be troublesome, or even dangerous.
In November of last year, Fidelity reported that people between the ages of 55 and 75 years old, had over-allocated stocks in their portfolios. This under-diversification likely left those same folks especially vulnerable when stocks crashed earlier this year.
Although the markets have healed somewhat since then, the fact is that no one can see into the future perfectly.
Reading news stories like these reminds me why gold is an important addition to any portfolio.
Gold’s recent rally speaks for itself. Historically, gold tends to perform well in times of crisis. It’s no wonder hedge funds, such as Elliott Management and Caxton Associates, are starting to hold more and more gold.
When you consider how to manage your family’s financial future, remember that a little bit of precautionary planning can go a long way.
