It Can be a Wonderful Financial Life

Last night I watched my favorite movie, It’s a Wonderful Life, starring James Stewart as George Bailey, a man who, on Christmas Eve, finds himself in deep financial trouble. His guardian angel, Clarence, helps George find clarity in life by showing him what the world would be like without him. George had a clear vision of what he was going to do with his life, but life sent him on another path.

Young George proclaimed, “I know what I’m gonna do tomorrow, and the next day, and the next year, and the year after that. I’m shakin’ the dust of this crummy little town off my feet and I’m gonna see the world!”

What George learns while living life and reflecting on a world without him is impermanence – things never stay as they are – and that life is precious.

I think we all can learn from George Bailey as we come into the holiday season and approach a new year. Here are a few things to learn from It’s a Wonderful Life:

  1. Preservation: Review your life insurance policies to ensure you have proper coverage if something were to happen to you or your spouse. George owned a $15,000 life insurance policy when he was earning $40/week. His coverage would provide income replacement for his wife and 4 children for about 7 years, not long enough to get the kids to college; that’s not even factoring in any debt and upkeep on his drafty old house. Strive to have enough coverage to pay off your debts and provide income replacement long enough to get your family back on its feet.
  2. Protection: If you or your spouse became disabled, would you have adequate protection for you income? Review your disability coverage, and if you don’t have disability insurance, you will need adequate savings to fund the loss of your income.
  3. Leverage: Review your debt. George Bailey ran his company with a large amount of leverage, and it almost put him out of business when the economy soured. Review your current loan terms to determine if refinancing is appropriate. Pay down your high interest debts, such as credit card and auto debt, first.
  4. Accumulation: Develop your investment philosophy. Evaluate the mechanics for managing your portfolio and what success looks like. People don’t plan to fail, they fail to plan.
  5. Distribution: Articulate your plans for wealth transfer, charitable giving, and planning needs in dire circumstances such as incapacitation or elder care issues.

Take some tips from George Bailey, and his old building and loan, and remember that although impermanence is certain, you can take control of your finances to give yourself a solid foundation.




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