Are You Sure You Have Your Most Prized Possession Protected?
by Cara M. Drew
June 12, 2019 .6 min read
I always tell my clients that in life, we have two lists that we try and tackle:
A priority list
An urgency list
The priority list usually consists of (but not limited to):
a will or an estate plan,
a financial plan,
consolidation of student debt,
and/or potential refinancing options for a mortgage.
The urgency list tends to include more immediate, pressing items, such as:
The truth of the matter is, that in today’s fast-paced environment, the urgency list on a daily basis tends to supersede the priority list. Why? Because let's be real...
not paying bills has immediate consequences,
not having food to eat just isn't an option (ever hear of the term "hangry"?),
having trash laying around is just disgusting,
and not making time to work out can really affect a person on so many levels.
With that, it's easily understood why our urgency list tends to trump our priority list. The effects are more immediate. But allowing this to consistently happen, can lead to dire consequences. But I'll circle back to this point in just a bit.
First, let's touch on the fact that today, we live in a world where women are breaking barriers more than ever.
Today, there are more women valedictorians and salutatorians at Ivy League colleges than ever before. More women are taking on C-suite positions, becoming business owners, entrepreneurs, and heading Fortune 500 companies. What's more, is that women are also finally claiming more seats in Congress, the Senate, and on judicial benches.
As I write this, we are coming up on the centennial anniversary of a Woman’s right to vote, when Congress passed the law on June 4, 1919, granting all American women the right to vote.
We certainly have accomplished quite a feat in just one century.
That being said, we need to also as women, plan accordingly for anything that may come our way, in all stages of our lives.
Old school thinking sometimes has a way of creeping into the way we plan for the unexpected, which is not at all. For more than a hundred years, we fought to prove we can, so we should continue to advocate for ourselves professionally but doing so financially is just as important.
At your current age, if I asked you:
What is your greatest asset?
What would your answer be?
If you are currently a student, you might be quick to say your car or your college savings account.
A young professional might say their condo or current 401k is their greatest asset.
And a more seasoned professional is likely to say their home or retirement accounts are their greatest assets.
But all of these answers are wrong.
What is your greatest asset?
Your greatest asset is your ability to earn an income and the future years your income represents.
Many, may feel they have more debt than assets and on a balance sheet, that may be true, but on a larger scale that income over several decades represents a value into the millions.
That my friend, is your worth. That said, yourgreatest asset is you.
With that in mind, one of the greatest mistakes successful people make in all stages of their life is forgetting to protect that asset. Whether it's because they didn’t know, didn’t understand, or because that urgency list always seemed more daunting than the priority list, unfortunately for most, failing to plan is harshly felt when it is too late to recover.
Most people think of life insurance as a necessary evil. Necessary is absolutely true, but evil it is not. Different types of insurance can work for you if you live if you die or even if you become disabled.
We insure many things in today’s day, our cars, our homes, our boats, our cell phones, even our pets. If you owned a machine that provided an increasing income stream every year and that machine provided the income that allowed you to buy that car, home, boat, etc, would you insure it? Of course, you would, because the consequences of that machine not being able to work, thereby producing that income, would blow up your ability to live your best life.
We are our own machine. With that, you make yourself a priority (cue the priority list).
Taking the necessary measures to protect your biggest asset, you, is how you take action on that priority list.
Some may argue that life insurance isn’t necessary for someone not yet producing an income, such as a child, or a student. I would counter back that insurance is essential at all stages of life and this is my rationale:
The younger the insured is, the less it costs for coverage. The child is also locking in their insurability for later on in life. If a policy is designed correctly, there are also plans that can grow cash value and strategically be tax-advantaged for access later.
As a parent, all three of my children have policies, not for the cash per se although that will prove helpful for them later in life, but because one month after I was married in 2003, my husband was diagnosed with MS. No one thinks life insurance is more important than someone who can’t get it or has to pay a higher premium because of a failure to plan ahead. Locking in my kid’s insurability for me was a no brainer, because we felt the importance too late.
A Student or Young Professional
Student loans; that ugly word that you either know is coming in hot or you’re already feeling the weight of the payments. Maybe in college or to get started, you racked up some credit card debt.
Some of my clients have debt in the 100’s of thousands. They feel burdened by the monthly payments. So, I always ask one question to them when I sit with them:
How burdened would your parents feel if you didn’t’ make it home from school or work and they were left to pay that debt?
If you could have planned and paid less than $15 a month to ensure that wouldn’t be their burden, wouldn’t you?
A Stay at Home Mom
Such an important role often undervalued because there is no actual ‘money’ being produced. Too often we forget of the money not spent in daycare, house cleaning fees, drivers, nannies, food services, etc.
If these women were not in the home, what would be the cost to replace what she is accomplishing for her family? The rate for a nanny in the Boston area is about $60k per year. If the stay at home mom were to pass away, just to hire someone in her place for 16 years is just under a million dollars.
A Seasoned Professional; Married, Divorced or Single
The more money you make, the more you probably spend! Life shifts financially when there are dual income and standards of living change.
If you were to subtract an income from the household, could your family maintain a standard of living? Could the mortgage be paid as well as the bills that accompany the home? Could the kids still take those dance classes, or play those sports? If an income in the household is necessary, you must insure that person’s ability to earn that income. Multiply your income for 10/20/30 years, what pool of money would that represent? The catastrophic penalty for not planning ahead will fall on the people you love the most.
In closing, as women, we naturally tend to be caretakers. Failure to plan isn’t always on purpose, some just don’t know, or we get overwhelmed by the thought of “what if????
The best analogy I can come up with that many can relate to is an oil change. Yup, I said it, an oil change.
We go into the oil change place because our car told us it was time. We pull in, expect to get in and get out for $50 or so, then you see him. That guy in the car jumpsuit with his hands so dirty it looks like he’s been under your hood since Thanksgiving and he’s holding this thing that looks like it came from your coffee pot. He tells you that you need a new ‘something or other’ and it will be $400.
What do you do?
You call any father, brother, husband, boyfriend, uncle, or whoever may know and ask if you really need it. Nine times out of ten, they tell you that you don’t and to just get the oil changed. The feeling of not knowing what to do is so unempowering. My best advice is to find someone that can explain to you what you need and why so when planning for your family and your future, you don’t feel like that girl getting her oil changed. We’re worth way more than ever feeling unempowered.
Know your worth, and if you don’t know, I’d be happy to tell you.
Cara M. Drew
Cara Sullivan Drew is a Financial Advisor with Concord Wealth Management where she works with individuals and families designing both short-term and long-term financial saving strategies.