emergency room financial planning

Emergency Room Financial Planning – It Isn’t About The Crisis

Every now and then, a financial planner’s office gets a panicked phone call something like this:

“I’m selling some real estate, and my accountant just told me I’m going to lose 20% of the sale to capital gains taxes. But they said an investment advisor might give me some options. Can you help me?”

“Yes, there are a number of things you can do to help offset or defer the gains.” The advisor mentions several options, and then asks, “When does your sale close?”


Which is several months too late to use any of those helpful tax-saving strategies.

Someone in this situation is trying to do is what I call Emergency Room Financial Planning.

I’ve found research showing that some 60% of ER visits are avoidable, that the medical issues could have been treated much more inexpensively had patients made timely visits to a doctor’s office. I don’t know what percentage of financial emergencies may be preventable, but my guess would be a whole lot higher than 60%. Because for the most part, we know that financial things are going to happen. Taxes need to be paid; car repairs and home maintenance are necessary, people get sick, accidents happen, hailstorms hit, we eventually will retire, and someday everyone will die. We may not always know exactly when, but we know we can expect those events and the financial impact they have.

Why, then, do so many people fail to prepare? Preparing for these occurrences is absolutely doable. You can save an emergency fund to prepare for a job loss or natural disaster. You can invest for retirement. You can do estate planning. You can carry proper insurance.

Most financial crises that advisors see are completely preventable. The key is to take action before something happens. My guess is, if I asked ten people whether this prevention was important, nine of them would say yes, it is. Just as nine out of ten people would probably agree on the importance of proper diet, exercise, and a host of other things we know would be in our best interests—but that many of us do not do.

So the question is, why do we procrastinate? I would suggest that our procrastination, our pushing away what we know ought to be done, is emotional. The following examples are just a few of the feelings that may be behind that avoidance.

A. Self-doubt. Fear that I’m not capable of understanding or doing what I need to do.

B. Anxiety or depression. Maybe I’m sad and depressed about having to retire, and it’s hard to take the necessary actions.

C. Fear of asking for help. Maybe I have a belief that asking for help is weak, or maybe I don’t trust attorneys or financial advisors or other professionals.

D. Anger. I may be angry or resentful that it’s up to me to take action.

E. Perfectionism. Fear of not doing everything right, or of being criticized.

F. Uncertainty. Lack of clarity or lack of knowledge about what needs to be done.

G. Overconfidence. I may assume I can take care of things at the last minute, or even need the adrenaline rush that comes with the chaos and pressure of scrambling to meet a deadline.

While it may not seem like it at the time, these are all resolvable issues. If there’s something that needs to be done in your life that isn’t getting done, the important thing to do is not to scold and shame yourself about it, but to sit and identify what’s really going on. To ask, “What am I afraid of?”

A useful exercise for this is the money dialog. Suppose you know you should be saving for retirement, but you just aren’t doing it. Start a dialog with “Retirement.” Begin by asking it, “Why am I so afraid of you?” Then imagine yourself as Retirement, and answer. “Because of . . . “ Give your response, and continue to go back and forth with the conversation. You can do this aloud, even physically moving from one chair to another as you switch personas, or you can do it in writing.

The important thing is to listen and respond as honestly as you can, allowing the dialog to drill down past the surface. It’s not uncommon to find, if you ask when this avoidance began or how it may have happened previously in your life, that its origin goes back to childhood.

You may also find it helpful to get some assistance. Financial therapists often guide clients in completing this type of exercise, which is a powerful tool for change.

Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.

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