Don't Let a Crisis Wipe You Out

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After concluding a study, AARP Financial issued a press release recently with the headline, "Vast majority of families struggle with financial implications of a life crisis." My reaction to that was, "Duh."

But some details surprised me. For example:

• Some 57% of Americans between the ages of 40 and 79 have experienced a life crisis such as a job loss, divorce, death of a spouse, major illness, or disability. Only 57%? Don't about half of all marriages end in divorce? That would be 50% right there. Haven't many of us also lost jobs, too? Still, 57% is most of us.
• Next: Women are more likely to be significantly affected (financially and emotionally) by a life crisis. This isn't surprising since women already face some fiscal headwinds. They tend to earn less than men, for example, and often miss out on some earning years when they take time off to care for others. And they live longer, too, requiring more money in retirement.

The main lesson in the survey is that major crises are not so rare in our lives, and they tend to have serious consequences, affecting our finances, health, emotional well-being, and relationships with family and friends.

What to do
Armed with that knowledge, we might want to prepare a little. Take some time to think about what you'd do if you were suddenly faced with a job loss, or a divorce, or a big illness. Do you have emergency funds to tap? Is your retirement planning well underway? Remember that when a crisis strikes, you probably won't be the most objective, rational thinker -- so do much of your thinking now. You might want to consult a lawyer or financial planner, too, to make sure that you're well positioned in the event of a life crisis. (For example, are many things owned by you and your spouse only in your spouse's name?)

Examine your big picture, too, without regard to crises. Are your stocks or fund holdings diversified, for example, or is most of your money simply in your employer's stock? Even well-respected companies will deliver a wide range of results, so don't put all your eggs in one basket:

Company	CAPS Rating (out of 5)	10-year avg. annual return
Apple (Nasdaq: AAPL)	***	30.2%
ExxonMobil (NYSE: XOM)	****	7.5%
General Mills (NYSE: GIS)	****	5%
FedEx (NYSE: FDX)	****	(0.5%)
Disney (NYSE: DIS)	****	(4.3%)
General Electric (NYSE: GE)	****	(8.8%)
Gap (NYSE: GPS)	*	(10%)
S&P 500		(3.2%)

Data: Motley Fool CAPS, Yahoo! Finance.

A little planning today can pay off well tomorrow.