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