Top 6 Do’s and Don’ts When Dealing with Unexpected Events

Maura Schauss |

By Todd I. Youngdahl, CFP®

Think back on the past year to the unexpected life events or financial expenses you experienced.  Life is anything but predictable, and these events can have serious repercussions on your life and finances.

Since everyone encounters life transitions and surprise circumstances, it’s important to have a financial plan to avoid making regretful decisions in times of stress. Here are 6 steps that can help you keep your plans on track despite unforeseen events.

1. Don’t Let Stress Make Your Decisions For You

Regardless of whether you’ve lost a job, a parent, or a spouse, it’s important to take six months to a year before making any big decisions like selling a house or making a large purchase. Research shows that people are more likely to ignore long-term consequences when making decisions under stress.[1] Even if you don’t feel like your decision-making is impaired, wait a few months to make sure you are considering long-term effects.

2. Don’t Sell Assets Without Your Advisor’s Help

Often, financial crises require immediate funds to take care of issues that arise. However, it is critical to avoid liquidating assets without the advice of a financial advisor. Selling investments and making withdrawals can create tax liabilities and may incur fees and penalties. Pressure to sell large assets like real estate may result in a lower sale value and contribute to unintended or costly tax mistakes.

Your advisor can help you evaluate your options and make informed decisions regarding the path forward for you during a challenging time.  

3. Consider Taxes, Penalties, And Fees

Investors under stress often sell investments without thinking and end up incurring hefty tax bills, fees, and penalties. It’s critical to understand the tax treatment and associated fees of any withdrawals you make.  

For example, if you withdraw funds from a tax-qualified retirement account before you reach the age of 59½, you will generally owe ordinary income tax on the distribution and a 10% penalty. However, some expenses are exempt from the penalty, so it’s important to consider whether your expenses qualify.

Many investments, like life insurance policies and annuities, may have substantial early withdrawal fees to consider. When you take fees or penalties into account, it may make more financial sense to liquidate a different asset. Work with your advisor and CPA to coordinate a strategy that will reduce the taxes, fees, and penalties you will pay.

4. Create An Emergency Fund

Establishing a cash reserve will also help you avoid selling assets before you’re ready. We hear a lot about the importance of having an emergency fund, but recent survey finds that 40% of Americans have less than $300 in savings accessible for a worst-case scenario.[2] Having money set aside for the unexpected, it’s one less thing to worry about in a disaster situation. Work with your financial advisor to help you establish a cash reserve plan.

5. Get Appropriate Insurance Coverage

Do you have the right amount of coverage for life, auto, home, and disability insurance? Most people purchased an insurance policy years ago that may not match their life circumstances today.  Review your current insurance policies to ensure you have the appropriate coverage for your life today.

6. Don’t Do Nothing

While it’s important to take your time when making major financial decisions—and this piece of advice may seem to contradict prior points—there is also a danger in doing nothing. Not taking action can be risky if your assets are invested too aggressively or are losing value. Being paralyzed by fear may only increase your financial stress. Evaluating your options and understanding the risks can help you feel more confident and informed.

If you are unsure as to whether your finances are set up to withstand a crisis, we’d love to help. At Washington Wealth Advisors, we’ll walk you through our holistic financial planning approach to solidify your finances, help reduce your risk, and prepare you for life’s inevitable transitions. Schedule some time with us to discuss your unique situation by calling 703.584.2700, book online or email




Washington Wealth Advisors is a fee-only registered investment advisory firm serving busy families, executives, women building wealth, and small business owners. We provide Wealth Advisory Services—financial planning coupled with asset management—guided by a personalized investment strategy based on each client’s unique goals. Our unbiased advice, independent approach, and proactive investment management help to support our clients’ overall financial peace of mind.


[1] Time. “Decision-Making Under Stress: The Brain Remembers Rewards, Forgets Punishments.” March 5, 2012.

[2] Go Banking Rates. “Americans’ Savings Drop to Lowest Point in Years.” February 13, 2021.