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Planning, Preparing, and Diversifying

March 9, 2011 · 33 comments

in Life, Personal Finance

Well, many of you know that 2010 was kind of a rough year for me in many respects.  I had welcomed 2011 with open arms.  Well, those arms are clamped shut and I am waiting for 2012.  Oh wait, the world is going to end that year, guess I better make the most of what 2011 has to offer.

Anyway, last year during benefits sign-up, we decided to go with the high-deductible plan.  Mainly because we figured things were pretty stable, nobody is on any long-term prescriptions, things were going pretty good.  Plus, the insurance we did have certainly wasn’t covering a ton in the first place, so we thought we would try something new.  Seemed like a great idea at the time, especially since the monthly cost was quite a bit less.

Well, I don’t know yet, but our plan may have backfired.

January brought 4 cases of bronchitis, and a sinus infection.  February brought a one day hospitalization and 2 follow up doctor visits.  March is bringing another follow up visit, and probably more after that.  I have paid my copay on all of these visits, but I haven’t seen the final bill on anything.

I am scared.

Maybe I will be pleasantly surprised and I won’t owe much on all of this.  I haven’t had time to go digging up all the rules for what costs what.  I did get a letter in the mail stating that they did cover the hospitalization.  I was glad about that, but then kinda frightened that there was a chance they wouldn’t cover it in the first place.

So, why am I rambling on about all of this?

I guess I am trying to share a lesson I have learned.

Many of us  spend a lot of time trying to create the best-laid plans for the future.  Some people may even obsess over these plans and manage every moment of their life (or every cent they make) to best ensure a desirable result.  However, life is a mystery, and you just never know what is around the corner.  Maybe the company you own a lot of stock in will suddenly get bought and you will be rich!  Maybe that same company is violating child labor laws and will be forced out of business, destroying your retirement portfolio. You just never know.

Therefore, I advise that people plan to a reasonable extent, and also remain somewhat flexible.  For those that are very structured people, that can be difficult.  However, there are many things in our life that we have zero control over.  In my mind, the best thing you can do is diversify.

Diversify what?

Diversify your money. Most people know by now to not just own stock in the company you work for.  However, you should think about what percent of your assets fall in real estate, cash, stocks, bonds, etc.  Think of each of your investments residing in a bucket.  If your ‘house’ bucket spills over (meaning a housing crash like we are in now) and you suddenly have to move, do you have enough money in your other buckets to allow you to still move and live the life you want?  Or, would that bucket spill be a catastrophe?  If that is the case, then you spent way too much money on your house and were not properly diversifying when you bought it in the first place.

Diversify your time. We all have tasks in life we must tend to.  Some people work, some people take care of the kids, and others may do volunteer work.  Think of your time being accumulated in these different buckets yet again.  If you are a stay at home mom and your ‘kid’ bucket is full, and you have minimal time in the ‘friends’, ‘hobbies’, or ‘spouse’ buckets, think of how you will feel when that ‘kid’ bucket is spilled over and all the kids have left for college.  What will  you have?  You will have a huge period of adjustment, when it is something you should have been preparing for all along.  Some goes for someone nearing retirement, and the ‘work’ bucket spills over.  You should have a variety of people and things that interest you so that you are not just stuck if your circumstances change.  (Like a forced early retirement.)

Diversify your interests. This is somewhat tied to number 2.  My point is that it is great to have a variety of interests and activities, and to be open to trying something new.  We only live one life, and you just never know what hidden talent you may have, or what hobby might suddenly interest you.  New activities can also lead to new friendships, and most likely a more richer life.

I know this post somewhat shifted in topic, but I guess my point is that throughout life, it is great to plan, but you also have to prepare.  Although nobody can ever predict every possible outcome and prepare for it 100 percent, it helps if you mentally and financially can handle an outcome that is much different than anything you could have anticipated.

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{ 28 comments… read them below or add one }

First Gen American March 9, 2011 at 6:10 am

You are so right. I’ve gotten burned by not being diversified in my investments already, so I can relate. With regards to my time, I think I sometimes do too much in too many categories.

I had the high deductible option for my health insurance this year too and decided not to take it. In general I think I’m now at the point where I’d rather pay a little extra every month (and maybe pay more overall) vs getting surprised by a big expense along the way. I have the room in my budget so I just go for it. I figure I’d regret it if I didn’t have it, but wouldn’t regret the extra I spent if we all stayed healthy and accident and sickness free.

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101 Centavos March 9, 2011 at 6:58 am

Sorry to hear about your family’s health issues, I hope that the rest of the year goes better. Practical diversification is a good rule to follow, in both investments and planning. The better we are prepared to handle the little crises, the impact of the occasional big crisis will be less felt. Sudden job loss is one of the more common catastrophes to befall households, but it need not be “sudden” if it is anticipated and planned for.

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Nicole March 9, 2011 at 8:01 am

Diversification is SO important! We really don’t have (working) crystal balls.

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Miss T @ Prairie Eco-Thrifter March 9, 2011 at 9:37 am

Sorry to hear about your rough year last year. I hope 2011 is better for you. Thanks for posting such a great reminder for all of us. It is so easy to get carried away in planning what we want to happen that we forget about what could happen. We are working on beefing up our emergency fund since it isn’t where we would like it to be so that if something hits we are prepared.

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DoNotWait March 9, 2011 at 10:26 am

Diversify is good of course, but over diversifying can also be harmful. Doing a little bit of this or that but nothing too seriously is no better. I guess the key is again balance.

Hope it goes better with the health issues. I am not sure if it’s really better or not, but you made me happy to live in Canada, where doctors appointment and hospitalization costs are not much of an issue.

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Suba @ Wealth Informatics March 9, 2011 at 12:34 pm

Sorry to hear about the health problems, hopefully it will get better very soon!

This might come under money, but we are now concentrating on “diversify the income” concept. I have ongoing health problems which we have come to terms with, but that still requires at least 2 doctor visits every week, some weeks I am so tired and not want to get out of bed. I figured it will only be a matter of time until I get fired or quit working. I might be happier if I stay at home or go mad, not sure yet 🙂 So we now want to concentrate on getting as many sources of income as we could – my husband’s income, my husband’s side business, blogging income if I can, freelancing, investments. We would like to add rental income, but not there yet.

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Kris March 9, 2011 at 6:46 pm

Suba – Sorry to hear about your health problems! Gosh, I hope you don’t get fired, that would be awful.

Good luck with diversifying that income, and getting better!

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Suba @ Wealth Informatics March 10, 2011 at 12:06 pm

Nah… Its ok, Kris. Right now, even with my frequent absences I get my work done faster than other people. So as long as some one wakes up and decides to do 2 people’s work I am fine for now 🙂 But I might quit and take a break myself for an year or two… Don’t know yet…

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Kris March 10, 2011 at 9:22 pm

I tell you Suba, having those 9 months off recently was a wonderful thing mentally, emotionally and physically for me. You will know what to do when the time is right.

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krantcents March 9, 2011 at 12:46 pm

I am really big on planning, but you can not plan everything. Part of every plan I include a contingency for those unplanned surprises that seem to always occur. I am not a pessimist, but realistically things can happen. I advocate the “belt and suspenders” theory to keeping up my pants. If one fails, I still have the other.

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Kris March 9, 2011 at 6:45 pm

Krant – I always call myself a realist, because I accept that many outcomes are possible, whereas others prefer the Pollyanna approach.

I like your belt and suspenders theory!

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retirebyforty March 9, 2011 at 6:01 pm

Hope your family feels better. Once you hit the max high deductible, you won’t have to pay anymore right?
Diversification is key to investment, but we all have to figure out our own asset allocation plan as well. Just being diversified is not enough.

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Kris March 9, 2011 at 6:41 pm

RB40- you are right, diversification is not enough by itself.

After the deductible, we should be ok. I knew this was a possibility, but I just didn’t expect it.

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Barb Friedberg March 9, 2011 at 6:32 pm

I’m kind of guilty of freaking out over unexpected expenses (and even some expected expenses). Recently, I’ve attempted to calm down in this regard. Up til now, I have every aspect of the diversification thing nailed. As usual, a fun and informative article! (I think I’ll stick it in my round up)

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Kris March 9, 2011 at 6:40 pm

Barb, I used to freak out over unexpected expenses. I am now so used to them that I don’t give it a second thought. I guess that means I have had way too many unexpected expenses.

I am sure you are great when it comes to diversification, and all aspects of finance!

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Evan March 9, 2011 at 11:51 pm

Here is to better health for the rest of the year (I raised my beer lol).

I think there is an old saying,
Men Plan God Laughs

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Kris March 10, 2011 at 8:04 pm

Evan, thanks for drinking to our health. Make it a double please! 🙂

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Afford-Anything.com March 9, 2011 at 11:52 pm

Just a tip in case you do get a big bill in the mail …

I also have a high-deductible HSA health insurance plan, and last year I received a bill from a medical clinic that seemed, to me, absurdly high. The clinic had billed my insurance and sent the remainder of the bill to me.

However, clinics often bill higher amounts than they expect to receive, because they know the insurance company will try to negotiate it down. When they send you the bill, they don’t often adjust the rate to the “being paid by an individual” amount.

So I called the clinic and very nicely explained that this seemed like a large sum, and I am responsible for it out-of-pocket, and could they please lower it?

They reduced it by almost 75%. I’m not kidding.

Just a tip!

P.S. Don’t forget to be nice to them on the phone! They’re tired to dealing with insurance companies and upset clients all day!

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Kris March 10, 2011 at 8:05 pm

Afford- that is a fantastic tip. I will definitely do that when the bills start rolling in, and I promise I will be nice!

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Ken @ Spruce Up Your Finances March 10, 2011 at 1:31 am

Nice article about diversification. The idea of diversifying is always good especially when it comes to your investment portfolio. As the old adage goes “do not put all your eggs in one basket” still holds true.
I also like the idea of diversifying time and interest. Sometimes, it’s good to do things out of the routine to add some spice in life.

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Kris March 10, 2011 at 8:08 pm

Ken- you are so right. Mixing things up a bit can make a huge difference in your life. You never know what you might enjoy doing that you never thought of before.

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Mike - Saving Money Today March 10, 2011 at 8:25 am

If there’s one thing I’ve learned it’s that no matter how well you think you’ve planned ahead, life is always there to throw you a few curveballs.

I hope you get the medical bills straightened out and have a great 2011!

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Kris March 10, 2011 at 8:09 pm

Mike, thanks for the well wishes. I guess it is the curveballs that can make life interesting. However, I am ready for a little boredom right now.

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Jeff @ Sustainable Life Blog March 10, 2011 at 2:36 pm

Great tips, I think that having multiple ways to “skin a cat” as the term goes is always a good thing, no matter how well planned you are. I think having adequate insurance is key as well – some things you cant plan for (like car accidents) and if you could “plan” for them, they wouldnt happen

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Kris March 10, 2011 at 9:24 pm

Jeff, you are so right about being properly insured. Car, home, life, disability, etc. I think a lot of young people ignore the importance of insurance as they are invincible.

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Alan @ Money Sanity March 10, 2011 at 9:28 pm

I too once took the high deductible plan ($2000)but for my auto insurance. A few months after the origination date, I had an accident which cost over 6k. Within a week of the car being repaired it was stolen. When I got it back it had over $1000 of damage which I had to pay. High deductible plans are great in the long run – but in the short run they can be very costly.

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Kris March 10, 2011 at 9:30 pm

Alan, that is so awful about your car insurance. How many years had you gone accident free before you changed your deductible?

I will see how much this ends up costing us, and will update.

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QUALITY STOCKS UNDER 5 DOLLARS April 4, 2013 at 7:33 pm

Interesting post great view on financial matters.

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