Plan to Fail
How to create your own safety net
By Joyce Alla and Leslie Martini
Warren Buffet famously says, “An idiot with a plan can beat a genius without a plan.” Planned events like weddings, birthdays, and funerals are the cornerstones of life. But even the best planning can’t shield us from life’s inevitable curve balls, the disappointing realities of divorce, unemployment, and financial loss. Failure will happen.
Along the path of life, failure is often considered a necessary stepping stone, a fork in the road that leads to increased resiliency, improved creativity, and even a greater sense of satisfaction. But what if the ramifications mean financial ruin?
Or a loss of self-respect? What happens when the silver lining is nowhere in sight, even for the eternal optimist?
Knowing that failure happens, is it possible to incorporate a protection plan? Here are some cautionary tales and advice from the experts on how to avoid and recover from costly failures in business, investments, and divorce. Death is, in fact, the only life event that is a certainty; might planning for failure help us recover more quickly, and focus on living our lives the way we choose before encountering it?
No One Plans to be Unemployed
Lisa Philpot, a Senior Marketing Executive in the high-tech educational arena found herself in an untenable position after decades of work. “It got to the point where I would sit in the parking lot for a good 15-20 minutes every morning trying to get the energy to deal with what I would be facing once I walked into the office. When I finally could take no more, I took back the power and quit. It should have felt like a victory to take myself out of the situation, but instead, it felt like a failure.”
For Lark Will, President and Founder of Will Call Consulting, the low point of her career was when she abruptly left a company and moved 1,500 miles back home, only to learn her mother was terminally ill. “I got through this by seeking help from a therapist and relying on friends, acquaintances and even a few complete strangers,” Will recalls.
Both women went on to have fantastically successful careers, but agree that digging out from a career failure is challenging. “To say that is was difficult is an understatement,” Philpot concedes. “When you aren’t working, the cruelty is that you have all the time in the world to relive every moment. You begin to play armchair quarterback for your own life. Instead of feeling like the world is your oyster, you feel like you can’t face that world.”
Will admits that recovery takes time. “It was about three months of job recovery, and a good year of personal recovery as I coped with the death of my mother.” Lark says the time involved a lot of “painful introspection” as she thought sincerely about “what I needed to do differently in order to have a more successful career and fulfilling life.”
Both women see career failures as an opportunity to learn. “Part of you changes forever,” Philpot explains, “but when you get through it, you also know without question that you won’t ever let anyone diminish your value, or steal your confidence. It may sound cliché’, but it really does make you stronger.”
Will recommends taking the time to “wallow” in failure but then get back in the game. “Realize failure will occur again, so start building up your resilience and make the failure work for you.” Will adds, “The best time to work on dealing with failure is when you’re succeeding. Talk to the recruiter that you might be inclined to blow off and help her find a great candidate. Attend that art opening or keynote conference. You’ll meet people you may need in your next venture.”
Pete Donaldson, a financial advisor for a top tier life insurance company, recommends having a plan in place for such life events. “Our parents always told us to have an emergency fund of three to six months of salary. In addition, a person facing unemployment needs to understand which assets are liquid and accessible without penalty, for example, an IRA can charge a 10% penalty plus taxes.” Donaldson recommends considering a Whole Term Life Insurance policy that can secure not only insurance but the added benefit of growing cash reserves which are tax-deferred and tax-free. “Instead of asking for a bank loan you simply reach into this account and take your loan with the option to pay back at a later date,” he adds.
Donaldson offers further advice, “Of course, always try to negotiate your departure. Being fired or quitting will place a larger financial burden than getting laid off and receiving unemployment services.” In addition, Donaldson recommends moving your 401k as soon as possible. He says, “It’s amazing how many people leave their 401k’s behind. Move your investment to an IRA. It’s much more secure than leaving money at a company that has no allegiance to you, especially if you’re not aware of the financial status of the company.”
Tom Lutz (not his real name) was blindsided when he was dismissed from a new sales management position “for cause,” after only 8 months. “Our numbers were on track and I had built a strong sales team.” He quickly discovered that the startup was under consideration for purchase, and his dismissal was for cost-cutting purposes. “I thought I was too experienced to be completely caught off-guard by this,” he admits. Now seeking legal counsel, he realizes how much professional advice could have helped. “You think you understand the contract loopholes because you’ve hired and fired people as a top executive, but having an attorney look over my hiring agreement may have saved a lot of frustration, and more specifically, money.”
In general, lower management positions do not involve true employment contracts but rather letters of employment according to corporate attorney Theo Reynolds. Reynolds recommends that a recruit or new employee keep all of the material from the recruitment/interview process. “This may not add much to a claim against the employer but should be helpful in navigating internally,” says Reynolds, adding “whether it’s about reconciling a dispute or an annual review/promotion.” Actual employment contracts become more important as a person becomes more senior, according to Reynolds. “Once an employee has the ability to negotiate an employment contract, I would always seek experienced counsel because there are many nuances to every aspect of a good emp contract,” Reynold adds. “Specific roles, responsibilities, expectations-compensation–base, bonus, options, equity, profits interests, etc, benefits, termination, what happens in the sale or merger, the definition of cause, severance. Each one of these can have many significant impacts and variance in scope.” Reynolds feels it is essential to involve an experienced employment attorney, one who is helpful throughout the entire process. “It’s more than simply having the ability to skillfully draw up an agreement. It’s about having an attorney who has experience in the positioning and negotiating of the actual agreement,” says Reynolds.
No one plans to get divorced
When a couple promises “til death do us part,” they’re not expecting to go through the heartache and financial turmoil of divorce. Evelyn Bond recalls her biggest failure and how that made divorce all the more difficult. “I had blind trust and faith,” she admits, “and I didn’t demand a voice in all major decisions.”
Bond recalls one financial situation in particular that epitomized her and her husband’s relationship, “We owned a disproportionate amount of a single stock. My ex-husband would not listen to cautions from our financial advisor or from me about putting so many eggs in one basket. Twice he got spooked during times of market volatility and sold off large chunks of this stock after a price drop. I had been taught by my grandfather that this was precisely the time to buy a good stock. Both times it was a very poor decision.”
Being involved as a married couple in financial decisions is incredibly important, according to financial advisor Pete Donaldson. “I met with a couple that was in their mid-forties and the wife was ready to leave because she was sure they were spending all their money and not saving or investing in retirement. It was a difficult discussion, but she was right.” Donaldson explains that despite a healthy yearly income, the couple had very little savings and many extravagant expenses, like boats, and cars. “We set up an emergency plan for them to invest 40% of their annual income for the next ten years,” Donaldson continues, “which puts them in a much better position.” The couple is still together with a new-found sense of commitment to their relationship.
“If I were to do it all over again, I would set ground rules and expectations from the beginning, while we were still dating, well before marriage,” Bond admits. “There was definitely a power imbalance.” Fortunately, that imbalance ended during the divorce proceedings.
After discovering her husband’s “flagrant” affair, Bond took control of the situation. “If you’re even contemplating a divorce, do not do anything in a rash manner,” she advises. Bond recommends consulting with the multiple top law firms in the area to find the right fit, and also to eliminate those attorneys from the spouse’s options. “Once you consult with an attorney, your spouse cannot use anyone from that firm,” she explains. Even though it’s a painful situation, Bond recommends being methodical and businesslike. “Remove emotion,” she says, advising to get copies of any and all documents, credit card statements, records, tax returns, bills and receipts. “In my case, my husband was acting like a teenager in love, so there was a window during which he was too distracted to be careful with paperwork,” she shares.
Even with a good attorney, divorce will inevitably affect your finances. “Even though I was told I “did well,” I still got the short end of the stick,” Bond admits. “Like most women who get divorced, my standard of living went down, while my ex-husband’s went up. I won’t starve to death, but I do have to be very careful.” As an example, Bond recommends deeply considering the future. “Even though our children are over 18 now, they still consider my house their home base.” She loves having her children home, but these are expenses that she feels should be shared.
The inevitability of death and estate planning is certainly another area that needs to be re-visited after divorce because, when neglected, out of date documents can lead to disastrous results. “During and after divorce, people are focused on healing and protecting their families, but I would recommend a temporary document, even in the midst of divorce, to record estate planning changes.” David Feakes, owner and founder of The Parents Estate Planning Law Firm, PC in Acton, Massachusetts.
Feakes recalls a situation when a spouse neglected to transfer healthcare proxy from their estranged partner for years after a contentious divorce. This conjures visions of awakening in a hospital with, perhaps, your least favorite person standing over your bed and making major health decisions.
Feakes understands that taking on estate planning after an emotional divorce is difficult, but ignoring it can be devastating. “Both families and finances are more and more complex,” Feakes says. While divorce lawyers can handle the actual divorce, there are many other questions to consider regarding power of attorney, health care proxy, retirement accounts, and insurance. “It may be the last thing you want to do, but every person coming out of a divorce needs to sit down with an estate planner.”
No One Plans to Make Bad Investments
Thanks to the countless options and information overload, investment missteps are common. Warren Buffet, one of the richest people on the planet and the greatest investor of all time, admits to regrettable investments along the way. In a 2010 interview on CNBC, Buffett revealed that Berkshire Hathaway was the “dumbest stock he ever bought.” Buffett warns against letting emotions have a role in any financial decisions.
Jim Lund, CCO and Founding Partner at NorthRock Partners, a financial and lifestyle advisor corporation, sees timing as the biggest mistake. “Bar none, the biggest mistake I see as it relates to investments is people trying to time the market. They sell when the market goes down and buy after it has gone back up. It’s part of the fight and flight mechanism in our brains. The second is just as important…diversification is the name of the game,” he says. “Diversification allows us to get through the ups and the downs without guessing which market or part of the market will do well or poorly. It takes the guesswork out of play.”
Recognizing the many variables involved in planning and timing, Lund suggests setting goals. “It starts with setting goals and taking steps to get on track to them. There isn’t a get rich quick scheme, only ongoing daily, weekly, monthly steps that we can take to systematically achieve the goal(s) over time. Time heals many mistakes and it’s never too late to start.”
No One Plans to Fail After Death
When it comes to estate planning, the biggest misstep Lund sees is not creating a plan in the first place.
“Statistics show that the majority of the US population has not created the basic form of an estate plan, namely a will. Without a will, the state in which you live has created a will for you.” Unfortunately, Lund adds, “You may not like it.”
A common mistake Lund sees is failing to fund the plan that was created. “Many times I see wills and trusts created by attorneys without changing ownership and/or beneficiary designations to coordinate with those documents. What most people don’t realize is the will is the third tool used at death to transfer ownership of a decedents assets. The first is joint tenancy or other co-ownership types, the second is a beneficiary designation, then comes the will if the first two were absent.”
Having “a difficult discussion” around death and estate planning is often the last thing we want to think about when picking up the pieces and building a new life. But inadvertently ignoring our after-death wishes can adversely affect those we most care about after we die.
David Feakes, from the Parents Estate Planning Law Firm, is familiar with the failures many have unwittingly left behind. He explains that some couples want a simple “I Love You Will,” meaning all assets go to the surviving spouse, and upon death to the children. “Problems can arise,” Feakes explains, “if the surviving spouse enters into a second marriage, and neglects to create a more complex plan that ensures assets go to the children.”
“My father was a successful executive and investor,” Susan Conrad (not her real name) reveals. “He had faith that his second wife would carry out his wishes, but she had her own plans, and kept all assets my parents had jointly acquired, including family heirlooms like jewelry.”
Feakes concedes these can be uncomfortable conversations to have, especially when trying to build a life with a new spouse, and many times there is mention of a pre-nuptial agreement. “But while pre-nups are easy to talk about in a conference room, they are hard to negotiate in reality.” Feakes stresses the importance of meeting with a good lawyer who will ask all the right questions. “It’s possible to set up trusts in multiple pieces that can protect a surviving spouse as well as the ultimate beneficiaries. But these conversations are easier with a professional who can facilitate the discussion, listen, and steer things in a direction that protects everyone.”
Feakes is in the business of helping his clients leave legacies that reflect their well-lived lives. And yet, it’s easy to get caught up in grieving, healing, or starting a new life chapter, so much so that we neglect the inevitability of death. “Outdated estate plans don’t work, in fact, they do just the opposite,” Feakes advises. Failure to plan and re-visit estate planning after major life changes can inevitably hurt the ones you love and want to care for after you’re gone.
Failure to Plan means Planning to Fail
According to the experts, the old adages are true. The best way to get through life’s difficulties is to be prepared for them. Consider the long term. Factor in career ups and downs, enter a marriage with clear partnership expectations—being aware of inevitable failure along the way will help buffer the setbacks. Learning from our own mistakes and the mistakes of others goes hand in hand with living our best lives “according to plan.”
In the end, most people look back and find failure’s forced motivation is a key to success. Failure will force you out of your comfort zone, and slay hesitancy and procrastination. By being prepared, it’s possible to harness the power of failure which inevitably leads to reinvention, and ultimately the path to a successful life well-lived.
About the Writers
Joyce Alla (bucket age 30) and Leslie Martini (bucket age 32) are the writing team Allamartinis. Please check out their website, blog and portfolio at Allamartinis.com
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