Your part in the tragedy (XII) - Lighthouses

Thursday, 21 October 2010

When you take the time to look at the things around you that could go wrong, you could be forgiven for being stunned into prevarication by the sheer size of the list. When you prune out some of the less reasonable items, say space debris impact or tropical diseases it starts to look a little less daunting.

If you were to make a list of the ideal position you'd like to be in when things started to go wrong that could be your lighthouse. In a small boat you should know where the lighthouse is and where you are in relation to it. You don't have to build one or even buy one, just look up every now and then and check to see where you are in relation to the lighthouse. Maybe you should shift from where you are to somewhere that's closer to the lighthouse and safety. In fact, when you think about lighthouses, which are generally on rocky outcrops of land or coastline, it may not pay to get too close to the lighthouse.

The same theory holds for financial services in your life. The things that make up the ideal list are like the lighthouse and may cost as much to construct or to buy. It's not the answer anyway. Know what's on the ideal list and why it should be there. But be a little realistic and probably even responsible about what you should actually do. Do what you can or should afford from that list and know why you're not doing the other things. But also know what you're going to do without those items when things start to go wrong.

Insurance on its own, as just one example is not the answer to people's problems. Planning is the answer.

Planning helps you to decide what should be on that ideal list and what you can and should afford in practice. Planning also has a far more important role in your life. It helps you to know what you can do if something goes wrong and you didn't or couldn't afford to take a particular item from your ideal list and put it into practice.

Here's an example I saw recently. A couple couldn't afford enough Critical Illnesses cover to eliminate their entire mortgage if they suffered a heart attack, cancer or stroke, but they could afford to substantially reduce it. If it does all start to go wrong for them a claim will still leave them with a sizeable portion of their mortgage. Planning for them looks at how to reduce their mortgage in the background as well as insuring what they can. How does yours work?

If you were out on the ocean in a small boat, and on somedays it seems that you are, you'd probably look for that lighthouse more frequently if the conditions started to change for the worse. Again the same principal applies with financial services. There is a place for them in your business, in your relationship with fellow business owners and at home for your family, for your estate and for you.

Take time every now and then to look for the lighthouse to see if you should shift closer to safety.

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