The Financial Double Dribble

Never pick up your dribble without a plan.

In the game of basketball, picking up your dribble at the wrong time can be detrimental. You can’t just start dribbling again because, well, it’s against the rules. It’s called a double dribble. So if you pick up your dribble, you need to have a clear plan of what you’re doing next. You should either be planning to shoot, or you should know who you’re passing it to. Otherwise, you’re just asking for trouble.

A good defender is going to smell blood in the water if you pick up your dribble at the wrong time. He knows that you now have to stay in that same spot until you get rid of the ball, so he’ll take the opportunity to smother you, cut off your passing lanes, and make life difficult for you.

I had to search YouTube for a long time to find a good case study, but here’s an obscure example of somebody picking up his dribble without a plan (with a riveting explanation from the narrator):

And without narration, another example of picking up your dribble without knowing what’s coming next:

So what does all of this have to do with your financial planning? Well, there are several financial equivalents to picking up your dribble without a plan…

1) Social Security

Way too often, people flip the switch and start their Social Security without a plan. In some cases, it’s because they’ve reached the age of 62 and they’re now eligible for Social Security, so they say, “Why not? Let’s do this!” And then a few years down the road it becomes clear that they should have waited to start taking it at a later age. But it’s too late. They already picked up their dribble a few years ago and there’s no undoing it now.

2) Cancelling life insurance

Sometimes your needs for life insurance change. It could be that you now need more life insurance coverage than you previously had. Or maybe you need less, but you do still need some coverage. Or maybe you’ve just determined that your current policy is too expensive or just not the right fit and you need to get a different policy with a different company.

Suppose you have $500,000 in coverage, but this was a life insurance policy that you got when your kids were still living at home. Now the kids are grown and out of the house and you decide that you now only need $200,000 (maybe to pay off the mortgage for your spouse if something happens to you).

In this case, it’s important to get the $200,000 life insurance policy in place before you cancel the $500,000 policy. If you cancel the old policy and then apply for a new one, what happens if your health exam doesn’t go well and they determine that you have some medical condition that’s going to render you unable to get coverage, or maybe the coverage will be more expensive than you care to pay?

Well, you already picked up your dribble when you cancelled the old policy, and now you have nobody to pass the ball to. And now you’re stuck without any coverage at all.

3) Quitting your job

Sometimes you’ve had all you can take at the office and you’re ready to walk away. Take this job and shove it, Mr. Foreman.

Well, hold on just a minute. Let’s not pick up that dribble until you know what happens next.

Sure, there are some people who have quit their job to “bet on themselves” and then gone out and found their next career (or started their own business) within a few days. But those stories aren’t nearly as common as the people who quit their job without a plan, thinking they’ll be back to work somewhere else in a few weeks, only to end up “between jobs” for an extended period of time.

Most people pick up their metaphorical dribble, get swarmed by the defense and dig a financial hole for themselves.

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So whatever financial decision you’re about to make, take some time to think things through in advance. Is this a decision that’s equivalent to picking up my dribble? If so, do I know what happens next? Do I have someone to pass the ball to? Do I have a shot to take? If I get in a pinch, do we have any timeouts left?

If you answer those questions before you pick up your dribble, you can save yourself from unnecessarily throwing the ball away.