A few months back, I came across this wonderful comparison between war-time and peace-time managers by Ben Horowitz, in his insightful book ‘The Hard Thing about Hard Things.’ The key point that Horowitz makes is that the skillsets required to lead companies through war-time are completely different from those needed during peace-time. And hence, what follows is that peace-time leaders are not necessarily the best leaders when companies find themselves suddenly in a war or a war-like situation.

This concept is quite intriguing and if we think about it. It is also applicable to our relationships and our money matters.

“Life is what happens to you when you are busy making other plans” – John Lennon.

This wonderful quote states in one line how most of us live our lives. While we make extensive plans for most eventualities, something suddenly happens and takes us by surprise and throws all our plans haywire. Take the last 12 months itself as an example. Who would have thought that a virus could throw the entire planet and literally every way of life as we knew it, so out of gear?

In a way, we live our lives largely assuming things are going to be peaceful and are usually well-prepared for peace-time events. We do make our plans and are prepared for some surprises, but it is when “war-time” strikes our lives that we suddenly find ourselves head under water and gasping for breath. Our plans were inadequate and we had never thought that something like this might even happen.

Learning from adversities

Such times are also the best for us to learn about our resilience, capabilities, strengths and weaknesses. They tell us about what to change within ourselves, hopefully before the next crisis hits.

-During “peaceful” times, we keep putting off making of plans and it is only during “war” times that you wish you had been better-prepared for the crisis, and promise yourself never to repeat the mistake. But it again goes to the back-burner once the crisis tides over, until the next problem strikes

-Even if you have a plan, it’s only during crises that you discover how good your plans were. Importantly, many times, you are prepared for crises A & B and but what actually happens is crisis C.

-Plans look good on paper during normal times, but operational hassles stand out when actual emergencies occur. We keep making and revising plans, without actually knowing how good the results would be during the actual need, because our plans never get “stress-tested.”

-The line between needs and wants is fuzzy during normal times. You make financial mistakes, but they don’t cost much, and you get repeat chances to make amends for your mistakes. But when crises suddenly strike, they can prove very costly, even life-threatening.

So how can one be financially prepared for the time when a “crisis” such as the present COVID-19 pandemic strikes?

War is a stress test on your plan

Every crisis is an opportunity; don’t let it go waste. Learn about what the weak points are in your finances and sort them out. Importantly, if you have an advisor, it is during crises that you discover how good (or bad) he or she is. Did you get proactive communication on how your portfolio is doing and what impact the crisis has on it? When you wanted to speak to your advisor, was he available easily and did you get a patient hearing? And finally, did the advisor proactively come back with the impact that this crisis has had on your financial plan? If the answer to any of this is no, your advisor is a “peace-time” advisor and not a “war-time” consigliere.

Wars help you determine your real needs

It is when crisis strikes that you discover what is truly essential for you, both financially and otherwise. And the wastages of the past also become clear as day. Use the learnings to immediately make lasting changes to your money habits.

Wars give you a window to peep into the new future

So, what are some of the “war” situations that has struck your life and how prepared were you financially for the same? Importantly, while you may have prepared well do you know what to actually do when it happens? And do you also know how not to react in such situations? If you feel underprepared, it is time to go back to the drawing board and review your plans. And in case you have a financial advisor who is not an effective lieutenant during crises, now is when you should look for an immediate change.