How to handle false positives in your financial planning

When we are walking our dog at night and hear something behind us, we may cross the street even though there is a far greater likelihood of it simply being a neighbor rather than a mugger. And when we are hiking the North Shore and hear a rumbling in the weeds, we may quickly get loud to scare off the bear that isn't there as a squirrel harmlessly climbs a tree.

These false positives protect us. Crossing the street or making noise may be unnecessary, but if our fears were real, we would be glad we did so. The important thing to discern is when false positives are useful and when they are not. Let's go over typical ones we see in financial planning.

Government shutdowns are real and have a tremendous impact on government workers. While some of those furloughed will get back pay, many will be trying to figure out how to make ends meet. Scores of consultants will lose income. But for most, the fear of losing your job is a false positive. The best ways to prepare for this unlikely, but dramatic event, are to increase your available credit lines, try to build up emergency savings and be intentional with your spending. We encourage clients to have as much free credit as they can get — and never use it. It is easiest to obtain credit when you don't need it. Home-equity lines of credit, no annual fee credit cards and margin loans are places where you can access money in a crunch.

We are finally getting paid to save. Many online savings accounts pay more than 2 percent interest. If you have the ability to set aside three months worth of spending (not income), you have breathing room when the unexpected occurs.

The most important thing you can do to address false positives around work is to manage your spending. This most likely will mean that you will end up needing less and saving more. Rather than making adjustments when you are forced to, why not make them when you choose to.

Another area where we see false positives is around managing aging. If you are forced to leave the workforce because of health issues, that is real. But some clients retire before they want to because they are concerned that they won't be able to do the things that they want to do before illness or incapacitation strikes. They may have a bucket list that they want to check off. But often a bucket list will lead you to do things that you feel like you should be doing rather than things you really want to be doing.

The best way to handle the false positive of retiring is to incorporate things you enjoy while you are working. Regularly fold meaningful things into your life to avoid regret. Planning gives you more time to enjoy the event because of the anticipation. Fewer, more special things, may actually help you stay interested in working longer.

If you want to move, move, but don't just move because of what could happen in the future. If you feel like you wish to build community early by moving to a graduated living facility, great; if you are looking at moving before you feel ready, though, you may have a much more difficult time adjusting.

The best way to handle this false positive is by preparing yourself through visiting various facilities and when you find one that works, signing up for their waiting list. If you are not ready when an opening occurs, you simply go to the bottom of the list.

Another false positive is around investing. Yes, the 2008 stock market caused real and prolonged pain for many. But being anxious about investing in the stock market is anticipating the bear in the woods, while most often ups and downs are just squirrels.

The funny thing about investing is that it is the volatility that leads to returns. The problem with waiting out the market for a correction is trying to determine when to get in. If you have don't want to invest all at once because you feel unsettled, come up with a program that would be comfortable for you. For example, invest either every month or every time the market falls by a certain percent. You want both time and price triggers — time triggers in case the market doesn't fall and price triggers to get you invested if it does.

While false positives can protect us, most of the time they get in the way of living the lives we wish to live.