Preparing for the unexpected has never been more important. We have been comforted by a 16-year golden period of economic growth. Inflation has been under control, jobs have been safe, the economy has been strong and asset values have been growing. Taking higher-than-acceptable risks always seemed to pay off, which enticed us to adopt even more future risk. 

The strong economy and markets were our safety net. We lost sight of factoring in the unexpected black swan. Take away the safety net and the swan can turn ugly. Research from the University of Melbourne's Centre for Corporate Law and Securities Regulation has exploded the myth that it's mainly low-income earners and financial charlatans who file for bankruptcy. It finds there has been a 261 per cent increase in personal insolvencies between 1990 and 2008, with almost 33,000 bankruptcies last year.

During that period, the number of bankrupts who classed themselves as managers, professionals and associate professionals rose from 11.3 per cent to 27.3 per cent. This is middle-class Australia, who should be secure and comfortable with solid income streams. The reasons they gave for their financial demise were mainly increased debt, ill health and gambling. In other words, overextending financially, taking on higher risk and not preparing for unknown factors such as ill health and redundancy that snapped their cash flow.

I'm reminded of some research from the Australian Bureau of Research some years ago, which found only 20 per cent of Australians retired when they planned. Eighty per cent had the decision taken out of their hands by death, ill health or retrenchment. The point of the research was to show that while we have fixed plans on when we want to retire, and base our retirement strategy on that plan, it rarely works out that way.

As a consequence, retirement is often under funded and lifestyle eroded. These two reports carry some fundamental lessons that need constant reinforcement.Firstly, investment rewards come with risk and that risk has to be kept in perspective. Risk assessment means not only looking at the type of asset class in your investment portfolio but also the balance. Take the sharemarket boom that reached its climax in 2007. How many people took profits and rebalanced their portfolio during that boom to mirror their original risk strategy?

I suspect most would have kept their shares during the boom even if it meant the equities balance increasingly dominated. When the crash came the risk profile of the portfolio would have been way out of kilter with what was originally intended. I also would suggest the lure of cheap, easily accessible money meant not only were middle-class Australians living beyond their means but racking up debt levels way in excess of risk comfort levels.

Sure, banks were adopting poor lending practices but it's up to the individual to take responsibility for their ultimate decision. Another lesson is to prepare for the unexpected. An emergency stash of cash commensurate with a person's debt and risk levels is an essential safety net in the event of redundancy. An old mentor of mine always advised keeping three-six months of salary in a separate account in case of emergency. 

Also, protect what you've got. If you are the major breadwinner providing the cash flow to meet commitments, then you must protect that cash flow. That means income protection, life and trauma insurance. The bankruptcy report shows illness as one of the major causes of people becoming insolvent. Finally, the earlier you start your investment planning, the quicker you'll not only get to your goal but also build in a buffer for the unexpected.