I’ve been a financial planner now for over 18 years and I’ve learned a lot about people and their relationship with their money. It’s not easy for most people, no matter where you are on life’s journey—just staring out or planning your golden years. Surprising to some, having a lot of money can be just as stressful as not having enough. Each phase brings with it financial challenges. But two topics are always at the bottom of everyone’s list.
1. What are the chances that I’ll get hit by a bus, really?
Unless you are independently wealthy, most people need insurance.1 Life insurance is of particular importance if you are young and have just had your first child. At this stage you become responsible for the care and upbringing of another person, including paying for college. Without large sums in the bank or invested, there is a great need to provide for your children and spouse / partner if you die prematurely.
Often I see young couples with just a token amount of life insurance usually provided by their employer. This could have a catastrophic impact on a young family, especially if the primary earner dies early. I know first hand how important this can be as my father died when I was six months old. Thankfully, my mom and dad had planned ahead and purchased life insurance which helped my mom stay at home for several years raising me as a toddler. Eventually she went back to work but it was super important to my mom that she had time to adjust to losing her husband and becoming a single parent.
2. What if I can’t work?
Earning a living is the single most important source of money for most people. While it is nice to dream about winning Power Ball and paying off one’s mortgage, that is not a likely or reliable strategy for financial success. Without income from work—especially during your early and mid-career—your life plans can be devastated.
Disability insurance can help cover most of your expenses should you become disabled. However, it is not cheap and that discourages many from signing up for coverage. However, I believe disability insurance is one of the most valuable forms of insurance for working people. If you are unable to work for medical reasons, disability insurance usually covers your basic expenses.2 Many employers offer group disability policies which we encourage you to participate in. Typically, the premiums are lower than if you want to go out and buy your own individual policy.3
3. Who gets my stuff when I die?
No one likes to think about their own demise, including me. There seems to be no upside. We are busy living our lives and having a good time. So, why focus on the end? Unfortunately, many people put off making wills, powers of attorney and health care proxies—the main building blocks of an estate plan.
When I talk to people about putting together an estate plan they sometimes tell me, “Everything is going to my spouse and kids, so I’m set.” In Massachusetts and most other states, without written, updated documents in place, state law is going to decide how your assets are divided and distributed. I think most people do not want the government or probate court deciding what happens to their assets and possessions. Often that means a long and costly process resulting in a different outcome than you intended.
These days you can buy legal software to put together basic estate documents or go to an attorney. Legal software may make sense for those who have basic needs and a simple estate but most of our clients have more complexity such as owning property in more than one state, blended families or small business ownership. For these more complex situations, I recommend using an attorney. They will meet with you, draft the documents, and make sure they are signed and filed with the county, as appropriate.
In addition, when you die, your beneficiaries will likely be able to contact the law firm for guidance at a very stressful time after your passing. Until the AI chat bots get a lot better, I’d rather go talk to a person when a loved one has just died.
I’m not going to assume that this article is going to get you going with getting the insurance or an estate plan but perhaps it has helped you to better understand two areas that people tend to procrastinate the most. I know it is hard to believe, but yes, I have been known to procrastinate financial decisions, too. Both have a lot to do with taking care of your family should something terrible happen.
If you love your family, move these to the top of your New Year’s resolutions list.
If you want to know more about insurance or estate planning, give me a call.4 We’re here to help. You can schedule a quick call with me by clicking HERE.
Lyman H. Jackson
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Check out our other blogs at www.PlanWithFPS.com/blog
· Avoiding a mess in your golden years https://planwithfps.com/blog/avoiding-a-mess-in-your-golden-years
· Before someone passes away https://planwithfps.com/blog/before-someone-passes-away
· 4 must-do’s before your retire https://planwithfps.com/blog/4-must-dos-before-you-retire
1.Independently wealth individuals and families have other insurance needs, mainly to protect their assets.
2 The number one disability claim is for back pain and the incidence of claims goes up significantly as you age.
3 Individual disability polices have the advantage that you own the policy and your premium likely stays the same; group policy premiums tend to increase as you get older.
4 Don’t worry, I don’t sell insurance and am not a lawyer but I work with these situations all the time. I can refer you to qualified professionals if that is what you need. Note: I do not receive referral fees of any kind for referring you.
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page