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  • Protection

    You are your most valuable asset

    When people think of the term “asset” they usually think of things like houses, cars, retirement accounts, etc.

    • BusinessDictionary.com defines asset as “Something valuable that an entity owns, benefits from, or has use of, in generating income.”
    • Your ability to gain income over the long run is the most valuable asset you have at your disposal.

    Building an emergency fund for the unexpected

    Some of those “what-if’s” include: medical bills, car problems, broken personal items, job loss, etc.

    Automate savings and don’t touch those dollars

    • First milestone: $1000
    • Next milestone: 3 months of income
    • Next Milestone: 6 months income

    These savings are separate from retirement, education, extras.
     
    They should be in an account that is very “liquid,” meaning they can be accessed quickly if needed.

    • This will typically be either a basic savings account or a money market account

    Health insurance

    • Individuals need to find the right balance of premium (cost of insurance) taken out of you paycheck (pre-tax) and deductible (amount paid out of pocket before insurance kicks in).
      • Higher deductibles are cheaper but require more in savings for medical expenses.

    Disability insurance

    • Designed to replace income in case of illness or injury that keeps you from working.
      • Odds of becoming disabled for 90 days or more during your work life are 3:1
       
    • Take what the employer offers.  It often makes sense to purchase extra if they offer it
    • Employer-sponsored disability insurance is taxable as a income and often isn’t enough to                                        cover monthly needs  
      • Purchase individual policy through trusted insurer.
      • Cost is often less than expected, especially if young and healthy.
       
    • Short term disability insurance is especially important for women who are planning on having children

    Life insurance

    • Designed to pay “benefit amount” to beneficiaries (designated by you) in case something as tragic as losing your life happens.
      • Odds of passing away with children still at home are 14:1
       
    • Employers often offer 1 or 2 times annual salary in death benefit amount.  If they offer more at a low cost, buy it.

    Retirement account (401(k)/403(b)/IRA/others)

    • Designed for long term retirement savings. Generally shouldn’t be touched until at least 59 ½ years old
    • If employers offer a “match” (employer will put a certain percentage of your paycheck in if you do as well) put in at least the percentage of the match (if they offer a 5% match put in 5%)

    Individual plans

    • There are often gaps in what might be ideal for disability insurance, life insurance and retirement savings
    • Individual disability policies should supplement employer policy so that at least 50% of income would be covered
    • Individual life insurance policies should supplement employer policies- amount based on individual situation- seek financial advisor to map out this amount
    • Retirement plans like Roth IRAs can supplement retirement savings