The Best Way for Investors to Navigate the 'Financial Zoo'

"There he is," our South African guide whispered excitedly. About 200 feet away stood a black rhino, the rarest and most aggressive of the rhinos. The rhino focused his full attention on us as he repeatedly took a few steps and stopped. After several minutes, he moved so a bush blocked our view of him. "Ok, he is using the bush as a cover and is probably going to charge. We need to leave. Start walking backward and keep your eyes in the direction where you saw the rhino."

As I started backing up as fast as I could, the guide barked in his loudest whisper, "Don’t run! If he charges drop to the ground; he won’t trample you." I can’t say I was comforted by this bit of information.

This experience taught me a rhino on the horizon represents a real and present danger. Ignoring it can result in paying a heavy price.

At this year's FPA Retreat, one of the speakers was Michele Wucker, author of The Gray Rhino: How to Recognize and Respond to the Obvious Dangers We Ignore. She said that when it comes to financial planning and investments, rhinos loom everywhere. Wucker described these dangers as different from elephants and black swans.

The elephant in the room is something we see but no one is going to do anything about. It’s not going anywhere, and we will construct our life to accommodate it. Common financial elephants that I see are adult children financially dependent upon enabling parents, a financially controlling spouse with a history of poor financial decisions, or a family member addicted to spending,

A black swan is unpredictable, something we don’t even see. It can be the loss of a job, the sudden death of a breadwinner, or the collapse of a highly rated financial institution.

The grey rhino is something you know is stalking you. You know it is coming, but you don’t know when. The trick to avoiding a rhino is recognizing and acting on the obvious dangers we ignore.

There are a lot of grey rhinos in the financial world. Here are a few common ones:

The next stock market crash. I guarantee you the stock market will crash at some time in the future. The best plan I know is to prepare yourself to do nothing, so you don't panic and sell.

Death. It is certainly inevitable, yet the majority of Americans don’t have a will.

Health costs. At some point in your life you will need health care, and good health care is, and will always be, expensive.

House and vehicle repairs. Normal wear and tear should come as no surprise.

Yet another critter lurks around the financial landscape: the bat. Where I live, bats show up every evening at dusk, without fail. Financial bats are equally predictable. These are future events or expenses that we know are coming, such as:

College. Subtract each minor child’s age from 18. That's the number of years you have to save to fund their college education.

Retirement. Subtract your age from the age at which you want to quit working. This is how many years you have to accumulate enough wealth to replace your salary.

Taxes. We even know the day and the hour on this one.

Birthday and Christmas gifts. These come every year, just as reliably as the bats.

What's the best way to cope with this financial zoo? I suggest emulating another animal—the lowly ant from Aesop's fable. Unlike the happy-go-lucky grasshopper, the ant put away resources so it was prepared for future hardships.