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Financial Articles from Hefren-Tillotson

What The Griswold’s Can Teach Us About Having A Financial Plan

December 5, 2016

The holidays can be an exciting and joyous occasion or filled with stress and anxiety depending on how you prepare for them. But, using the Griswold’s situation in National Lampoon’s Christmas Vacation as a learning experience, you can take some steps to make the holidays a bit more bright. So, grab some eggnog and your moose mug, and consider the following tips to hopefully ensure a better, less stressful, holiday season:

  • Don’t count your chickens before they hatch (and communicate with your spouse) – Clark learned this the hard way when he decided, unilaterally, to buy an in-ground pool prior to receiving his Christmas bonus. As it turned out, he instead received a Jelly of the Month membership and was potentially left with an over-withdrawn bank account. By relying on a source of income that you haven’t yet received, you put yourself at risk of financial catastrophe. To avoid a similar situation, don’t write a check (or charge a credit card) with money you don’t have. Also, prior to making any major purchase, be sure to speak with your spouse first to avoid potential conflict. Financial disagreements account for a great deal of marital strife, so clear communication is imperative.
  • Make sure you have an emergency reserve – When Cousin Eddie decided to take it upon himself to kidnap Clark’s boss, Mr. Shirley, he puts Clark in a precarious situation with both his job and law enforcement. Luckily, Clark did not get fired (and actually got that bonus check he was expecting), but real life is not the movies, and you should always be prepared for the worst. Therefore, it is important to have a liquid source of funds available to meet your monthly expenses until you can regain your footing. This account is normally recommended to cover approximately 3-6 months’ worth of expenses.
  • Save some of your year-end bonus – Because Clark didn’t have a financial advisor, he decided to spend the entirety of his Christmas bonus on an in-ground pool. While bonuses (and pools) are exciting and should be enjoyed, you should consider saving at least a portion. This could mean padding your emergency reserve, depositing money to a brokerage account, or contributing to an IRA. Having extra funds on hand in case of emergencies or unexpected opportunities can help bring peace of mind and provide financial stability. Should Clark have encountered other issues, all of his money would have been tied up in the pool which is not a liquid asset (pun intended).
  • Review your insurance coverage – Unfortunately for Todd and Margot, they had Clark as their neighbor, who proceeded to cut down a Christmas tree which then burst into their living room window; this is where it pays, literally, to have homeowners insurance. Clark wound up driving his car under a truck, which could have turned out poorly for all parties involved; surely the Griswold’s learned their lesson and reviewed their car insurance coverage. Clark had another near miss when he tumbled off the roof while trying to hang Christmas lights; he definitely would have found disability insurance useful if he had gotten severely injured and was unable to return to work. Finally, Clark presumably suffered from high blood pressure and was at an increased risk of a heart attack during this particular holiday season; hopefully he had decent health insurance coverage.
  • Keep your estate plan up-to-date – Unbeknownst to Uncle Lewis, Cousin Eddies dog, Snots, had drank much of the Christmas tree water which wound up drying it out. When he went to light his cigar, he caught himself, and the Christmas tree, on fire. Luckily, Uncle Lewis survived, but it easily could have turned out far worse. That is why it is imperative to have updated legal documents. These can help ease the estate distribution process and reduce family conflict in an already stressful time. This includes Wills/trusts for distribution of assets after death and Powers of Attorney/Living Wills for incapacitation.
  • Consider pet insurance – Aunt Bethany’s cat made the unfortunate mistake of chewing on electrical cords. Should something similar happen to your pet, chances are the vet bill will be fairly high. Much like human health insurance, pet insurance allows you to set deductibles and co-insurance based on an agreed-upon monthly premium. While not cheap, in circumstances where your pet requires more expensive care, this coverage can help greatly reduce the cost of your vet bill and save you money in the long run.
  • Give to charity (or family) – When Eddie admitted that he couldn’t afford Christmas presents for his kids, Rocky and Ruby Sue, Clark graciously offered to purchase them on his behalf. While certainly kind, hopefully Clark had enough funds set aside, and enough funds in his budget, to allow for that additional expense (in reality, he most likely did not). That being said, should you have the resources, gifting can be a great idea. Whether its helping those less fortunate or purchasing gifts for family members who don’t have the funds, the joy of helping others is priceless. In addition, should you decide to give to charity, you may receive the added benefit of a potential tax deduction and a reduction in your gross estate.

Prior to hosting your next family gathering, you may wish to consider having a MASTERPLAN done first. This financial plan will take a comprehensive look at your financial situation and help you determine the best course of action. This includes helping you plan for that next big purchase, establishing an emergency reserve, ensuring you have adequate insurance coverage, helping you save part of your year-end bonus, and putting together a gifting strategy. Please contact Hefren-Tillotson for further details.

 

This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgement as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.