Rethinking Your Finances

"People started to put their financial houses in order and they recognized, in a matter of a few moments, that everybody is vulnerable," says Sheryl Garrett, founder of the Garrett Planning Network, a nationwide network of fee-only financial planners.

Sales of life insurance spiked. Parents met with estate-planning attorneys to create wills. Others re-evaluated their lives and took early retirement as suddenly spending quality time with loved ones seemed more important than a few extra dollars in the nest egg.

But as time passed, many of those changes proved to be short-lived. "We promised ourselves to get our financial households in order five years ago," Garrett says. "Have you done it?"

On this fifth anniversary, her advice is simple: As we watch the commemorative events unfold, let's use this opportunity to reflect and evaluate, much in the way we did in the days and months after 9/11. "Use this memorial as an opportunity to do what's in your family's best interest," she says.

From life insurance to lifestyles, here's what Sept. 11 taught everyday Americans on the personal finance front — and why it makes sense not to forget those lessons five years later.

A Wake-Up Call
The strongest evidence that 9/11 caused families to think about protecting themselves — financially — was seen in the life insurance industry. "Sept. 11 woke all of us up to our own mortality," says Diahann Lassus, a Certified Financial Planner (CFP) in New Providence, N.J. "It caused us to think, if something happens to me, what would happen to my family?"

In the immediate aftermath of 9/11, Americans across the country scrambled to fill in the gaps. Applications for individual life insurance policies jumped by 8.6% for the nine-month period between October 2001 through June 2002, compared with the same time a year earlier, a significant increase, according to the Insurance Information Institute, a New York-based industry information group.

That spike, however, was short-lived. Applications volume leveled off in the following months and, since the middle of 2002, has actually been declining. That's a mistake, Garrett says. "Overwhelmingly, the people I run into — the average Americans — are drastically underinsured," she says. "And that's not an expensive thing to fix."

Riding Out the Market Plunge
Most financial planners sent out letters to their clients in the days after Sept. 11, reassuring them of the market's long-term resilience and warning them not to act upon their fears. But not everyone listened. "There were many people who did, in fact, pull out of the market instead of riding through it," says Lassus. "Now we know that the folks who stayed in and continued to invest, certainly did better."

Nearly $30 billion left the stock market in September 2001 alone, according to the Investment Company Institute, an industry trade group. In 2002, investors cashed another $27.5 billion out of stocks, while pouring more than $124 billion in taxable bonds.

Needless to say, cashing out was a mistake. "We have so much [market] history to the point where we see that things do eventually even out," says Barbara Steinmetz, a CFP in Burlingame, Calif., who reassured all her clients in the days after Sept. 11 that they should stay put in terms of their investments. "Every one of my clients is better today than they were on Sept. 10," she says.