By FPA member Leslie T. Beck, CFP®, MBA

Last Updated: May 2, 2011

Just about everyone has a financial plan, whether they know it or not — that’s the “plan” they’re living right now.

But stuff (i.e. “unplanned”) happens in life. Some of it’s good, but a lot of it is bad. People lose their jobs, develop chronic illnesses, get divorced, have disabling accidents, lose everything in fires or natural disasters, and die unexpectedly. If one of those things has not yet happened to you, I’m sure you know someone who has experienced at least one, if not more, of those events.

So everyone (even those who have a formal, written financial plan) should also have something else besides the plan they’re living right now — a Plan B.

What should a Plan B cover? While you can’t plan for every possible occurrence in life (simultaneous earthquake, tsunami, and radiation exposure is one event that comes to mind), you can make sure that you have the resources and flexibility in place to get you through the tough times when they come (and they will come!) Here are a few suggestions, in no particular order, on what your own personal Plan B should contain:

• A plan for obtaining a new job. In a report released in September 2010, the Bureau of Labor Statistics reported that baby boomers held an average of 11 jobs from ages 18 to 44. These same baby boomers experienced an average of 5.2 spells of unemployment during the same time. Unemployment spells were associated with education levels — high school drop-outs experienced an average of 7.7 periods of unemployment, versus 3.9 for college graduates. Your plan should include networking actions that you have taken or will be taking, ongoing education to ensure your skills are up-to-date, and an emergency cash reserve of three to six months of core expenses.
• A plan for illness or disability. Your Plan A should already include health and disability insurance. But your Plan B needs to consider not just the income impact, but the impact on how you want to live your life. Who will your support group be? How would an illness or disability affect your family? How would it affect your current life vision, and how could you adapt?
• A plan for disaster (natural or otherwise). The Federal Emergency Management Agency (FEMA) has a wealth of materials available online to help you prepare for disaster. For all events, you should have copies of important documents available and ready to go, as well as in another, fireproof location. 
• A plan for death, divorce, or separation from a spouse or partner. Again, your Plan A should already have considered the need for life insurance on your significant other. But, your Plan B needs to consider a lot more than that. Do you know where your important papers are located? Do you know what bills need to be paid, and how that is done (check, direct debit, etc.)? Have you established credit in your own name? Do you know where your savings are located? If you’ve been depending on one person in your family to take care of your personal finances, now is the time to ask to be included and educated in those details. What about household matters, such as maintaining the residence, getting children where they need to be or doing laundry? While “division of duties” is a great time-saver for families, it’s important that all members have a good grasp on what’s really needed to keep a household up and running  just in case.
• A plan for the unthinkable. Sometimes things happen to us or to people close to us that are just unimaginable (again, think earthquake, tsunami, radiation exposure). Good financial planners encourage the development of resiliency in their clients — the positive capacity to cope with stress and adversity. The American Psychological Association suggests the following 10 ways to build resiliency in your life:
  1. To maintain good relationships with close family members, friends and others.
  2. To avoid seeing crises or stressful events as unbearable problems.
  3. To accept circumstances that cannot be changed.
  4. To develop realistic goals and move towards them.
  5. To take decisive actions in adverse situations.
  6. To look for opportunities of self-discovery after a struggle with loss.
  7. To develop self-confidence.
  8. To keep a long-term perspective and consider the stressful event in a broader context.
  9. To maintain a hopeful outlook by expecting good things and visualizing what is wished.
  10. To take care of one's mind and body by exercising regularly, paying attention to one's own needs and feelings and engaging in relaxing activities that one enjoys.

FPA member Leslie T. Beck, CFP®, MBA, is a founding member of Compass Wealth Management LLC in Maplewood, N.J.