Today we are going to talk about the set up of the financial house. Basically how it should look and how the process should be prioritized. When I meet with new clients and especially young families, I always use the builders analogy. I am sure some of you have heard of it, but lets state it anyway. If you are planning on building your forever home.. A home of your dreams and you get all the choices. You search far and wide for that right place to buy the land. Once found, you pick the land and ask the builder to start the process. What is the first thing that the contractor must lay to make sure the house is strong? Well if you know of building and construction, it's a simple answer... the FOUNDATION. That is the most important thing that the house needs, a rock solid spot to rest upon. Especially in California where the ground can move on you, you want that foundation to never give. See the foundation is the income that this lifestyle is built upon, the person/people that pay for everything.
In today's age, most families are built off of what 2 people bring in. They share expenses, the buy based upon the income of 2. The issue arises when you remove one of those people prematurely from the picture. Bills don't magically get cut in half, the banks don't allow your mortgage to be half the payment. The credit cards still have a minimum payment to be paid. I have always found it funny that the government will require you to get some insurances like Auto insurance, Home owners insurance, Health Insurance... But the thing that pays for them.. is not required to get insurance.. our income. That's why I believe the foundation of any financial game plan should be to insure that the person/people who pay for all we have is insured themselves.
I believe that the foundation should be a basic life insurance plan. Now I know a lot of people will say.. "I have life insurance through work", "life insurance is a rip off", or "I'm young/health I don't need that". Well, yes some jobs do offer group life insurance; but I'm talking about life insurance that you control. That you actually have your own policy in hand and not just a certificate. Besides the idea of leaving your foundation in the hands of people who will argue with you over that yearly $0.25 raise, there is no guarantee that your job will keep that benefit paid for if they need to save on overhead. Sure, some companies may allow you to keep that if you pay for it but you wont get a say of the type of insurance or the terms on it. There is also the little problem of knowing how long you may be at your current job. Either do to cut backs, changing in scenery or getting fired.. we really have no control of that job. According to the Bureau of Labor and Statistics, the average length of time at a job is 4.6 years... With that in mind.. what is the average time frame it takes to find a job with good benefits. Especially now a days withe the job market were it is, are you willing to gamble your families financial future with the chance you will find another job with the benefits you want? Or even that you will still be in good health, and alive for that matter, when you find something?
Some Life insurance plans can be a "rip off" if you fail to study the policy and all its features, fees, restrictions. You must know the right questions to ask, what to look for and most importantly what fits YOUR needs financially not the needs of the agent that is selling it or sold it to you. As for young and healthy... lets face it. No one knows when our times up, regardless of health. How many car washes and donation trays have we seen in our community because they never got to it or didn't think it was a need.
I love the idea that the banks, insurance industry and credit industry will require you to insure all the things that they lent you money for. They don't however require you to have life insurance should the person paying for them pass. I believe that is because they know that if something does happen, at least they can still get your house, car, other valuables and send you to collections if needed. They can keep you paying on things for the rest of our lives if we do not have that solid foundation. Families have enough to grieve about without having to deal with corporations breathing down their necks about bills. So that's where we are going to start.. with the foundation.
You may ask though.. how do I pick a Life Insurance policy with so many to choose from... Yes, there are a lot of choices to pick from.. so we will be covering the basics of 4 different types of policies in the next blogs.. The 4 we will be covering are Whole Life, Variable Life, Universal Life, Term, and Term with return of premium. IF there are others you would like to know more about drop me a line and I can add more. I will give you a general break down of policy features as well as what you need to make sure you know so you wont get burned by the types. I will do my best to keep as impartial as I can, but by the end you will get a good idea of were I stand. Till then a parting though of wisdom... Many believe that knowledge is power, we grow up on that idea. The truth of it is, only APPLIED KNOWLEDGE is power. The rest is just taking up space. Apply what you learn and believe, only then can you improve your situation. Sleep well WebLand...
AXI C.
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