Foresight

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Spontaneity did not play out well that day. The extended Schwanz family gathered at the central Oregon coast for a week of summer memory making. My brother and I left the vacation rental house (without telling anyone where we were going) for a quick trip to Depot Bay. My brother wanted to visit his friend who operated a charter fishing boat. We found him, and he invited us to join the fishing expedition just about to leave. He had open spots, and if we would run up to the kiosk on the street above the dock to get our fishing licenses, we could join the trip at no additional cost. We didn’t even discuss the matter—just hustled so as to not delay the paying customers.

About an hour after we hopped onto the boat, we started fishing for salmon. The captain listened to radio chatter and occasionally moved the boat in the direction of others who were catching fish. Even with these efforts to maximize the potential for success, fishing is a slow process. It was late in the afternoon when we chugged back into one of the world’s smallest harbors.

My brother and I were quite proud of ourselves as we walked into the vacation house with our sea-fresh fish. We both came back with the legal limit. However, the bluster quickly vanished as my wife informed me she didn’t appreciate not knowing where I was. She had received word from home that our house had been burglarized. Having no clue about where I had been only intensified the concern over the mess we would find when we got home.

Upon hearing the news, and after apologizing for my wayward behavior, I remembered I had ignored the renter’s insurance policy renewal notice. We planned to move shortly after the policy termination date, so I had decided to let the policy lapse. A quick call to the agent prompted me to send in the renewal premium, and then make the claim for the loss.

Prudent Anticipation

Many of the key issues in personal finance require foresight. Even though a person cannot predict the future, it is essential, for financial stability and health, to anticipate the future. Decisions made in advance can have significant ramifications.

The purchase of insurance, for example, must be done before a claim can be submitted. The insurance company assumes the risk, after due diligence and actuarial calculations, in exchange for the premium. The person who wishes to transfer the risk to the insurance company must have the foresight to do so before the loss.

Planning well for retirement requires a long-term perspective. A person who invested $500 per month with a 5 percent return would have $416,129 in the retirement account after 30 years. The same person would have only $133,644 if he or she started 15 years later. Building a solid financial future requires forethought.

Numerous people at all income levels live from paycheck to paycheck. Even some who take home large salaries spend it all or more each month. When an unexpected expense comes, the person faces financial crisis. A little margin in the form of an emergency fund could take some stress out of life.

A will and estate plan must be drafted in advance. Some young parents think these legal documents apply only to older adults. Should an untimely death occur, however, without the existence of these documents, state law will dictate the naming of a guardian for children and the distribution of the estate. Consulting with an attorney in advance can appropriately prepare families for the unthinkable.

Good financial planning will include settling the issues of the past through paying off debt. A person who simplifies the present by living within his or her means and disciplines the appetite for what is consumed today or tossed tomorrow can build a firm financial foundation. The wise person also anticipates the future. Whether it is to minimize risk through the purchase of insurance or to maximize return through early and prudent investment, personal finance cannot achieve its goals without foresight.

Originally published by Pensions & Benefits USA.