LIFE STINKS

Death and taxes are to be expected, but so much more could derail your life’s plan. Here’s how to financially prepare for five of life’s little uncertainties.

Just thinking about money causes all kinds of problems for our well-being. A national survey by Leger on behalf of the Financial Planning Standards Council found that 42% of Canadians rank money as their greatest stress, with women more affected than men: 51% of women said they’re losing sleep over financial worries, 30% suffer anxiety and 9% report overwhelming stress. Men sleep more soundly, but financial worries still cause 40% of them to toss and turn.

Of course, no one wants to think about taxes or death, but those aren’t the only things that we worry about. Turns out, life stinks for a variety of reasons: divorce, disability, unemployment or underemployment, illness of a spouse, child or parent — all of which can cost a lot of money and derail even a carefully thought-out life plan.

“People aren’t worried so much about the dollar figure as much as what that income represents to themselves, their family and, ultimately, their objectives,” says Will Britton, a certified financial planner and financial advisor at Marlin Financial in Kingston, Ont. “The big thing is to find those points where people realize that life is going to happen. What are the things that can throw you off track? Look at the likelihood of an event and then the significance of that event and what might happen.”

Financial planners say one of the key things to do when preparing for the worst is to give yourself as much flexibility as you can. Just because a bank approves your $ 600,000 mortgage doesn’t mean you can afford a $600,000 mortgage, says Sara La Gamba, president of Advocis Toronto, an association of financial advisors and planners. Maybe that mortgage is affordable only if a big chunk of your income is going toward paying it off, which doesn’t leave much for other things or unexpected expenses. Banks have their metrics such as debt ratios to determine how much they can lend to any given individual, but they’re not thinking about you losing your job or becoming ill.

“As financial planners, we’re seeing the risks, we’re seeing what if this happens, this happens, this happens?” La Gamba says. “We’re always looking at the doomsday scenarios and then sometimes it’s having these really difficult conversations with our clients to say you can’t afford this, you shouldn’t be in a house this big, or maybe taking on this mortgage doesn’t make sense.”

Exactly what anyone should do depends on their situation, but there are some common answers for some of life’s biggest problems.