How Much Money Do I Need to Retire? or What’s My Number? Part 8
There are a few more things to think about as we button up our financial plan.
The next few weeks
Yes, I know, these next few posts may not be the most interesting ones you have read, however, we all know that there are important things we all must do that may not be that interesting. And…you may learn something along the way, so let’s dig in!
We’ve made a pass at trying to determine “YOUR NUMBER.” Depending upon where you are in life and how complicated your financial goals are, you may have been able to do that. Or let me say, you may have thought you had it. Because, you see, it’s not about just getting to the end, but about enjoying the ride and ensuring we are adequately protected along the way. So, whether you have nailed YOUR NUMBER or not, I want to cover just a few more important things that really need to be part of your financial life. We are going to wrap up our discussion of “YOUR NUMBER” in a few weeks. In the meantime, there are a few other things I want you to consider before we finalize your completed financial template.
Let me reiterate, and I think I’ve previously made the point, that our financial template is never truly final; it’s a living document that evolves throughout our lives. It’s a target to shoot for, a destination to drive toward. You do have a specific target destination you want to arrive at in life, don’t you? That target destination corresponds with your number. That magic place where everything aligns and all your efforts come to fruition. The place where you can say, “I’ve achieved my dreams! I’m living my best life!” I want to make sure you understand that this magic place is not necessarily your retirement date. Or let me say it may not be the retirement date most people think of. For most people, the magic place is in their 60s, but as you are about to see, that may not be the case for everyone.
When you were a child, did you watch the movie Alice in Wonderland? Do you remember the scene where Alice was on a path and came to a fork? She did not know which way to go. She noticed the Cheshire Cat, sitting in a tree, and she asked him, “Which way should I go?” He answered, “That depends upon where you are going.” Do you remember what she said next?…”Well, I’m not really sure…”, to which he replied, “Then it does not really matter which path you take.” This is exactly what we don’t want to have happen to you. Be confident in your decision of where you are going, and then let’s follow the proven path to get there!
Here is what I want to cover for the next four weeks, at which time we will wrap up our discussion on YOUR NUMBER and be ready to move on:
This week: Protecting you and your family. The FIRE Movement.
Next week: The crooked path to financial freedom. Constraints. Prioritizing constrained or conflicting goals. The priority matrix
Two weeks: Completing the financial template
Three weeks: Summary of financial goals
Protecting you and your family with insurance
Using the analogy of a seatbelt from above, we all buckle up when we get in the car; we just hope we never have an accident and need it. If you have responsibility for someone else, such as a spouse or children, you then also incur an obligation to protect them. Because you love and care for them. Think of it this way. If you are in an accident and are killed or disabled, how will your family survive? The answer to protecting your family is to ensure you are adequately insured with life, disability insurance, and other insurance so they can continue should something happen to you. I mean, really, none of us wants to see our family’s life disrupted even more should they lose us. Insurance protects them so they can go on. Unless you are sure you have adequate coverage, I suggest contacting your insurance agent today and getting a checkup. Notice I just said ‘contact,’ as in ‘talk to and visit,’ your insurance agent. I stand behind that recommendation, but I want to touch on a few types of insurance so you have a little ammo in your pouch.
Auto, property, liability insurance: In my experience, many people are underinsured, and you should meet, in person, with your insurance agent periodically to review your coverage. Notice I said in person. The reason I said this is that your insurance agent is one of those people you and your spouse need to know and have a relationship with. Besides being good business, it’s good for you and your family…just in case. Note: Because homeowners’ insurance is getting so expensive in some places (Florida, California), I’m hearing more and more families are choosing to go without home insurance. Ugh, can you really afford that risk?
Medical Insurance: This is typically obtained through an employer. If you cannot cover your family through your work, you may need to find an alternative, such as the exchange (Obama Care or a health cost-sharing network). Like property insurance, there are groups of people who choose to go without medical insurance. It all sounds good, until…
Life Insurance: Typically comes in whole life or term. Whole life insurance is typically more expensive but offers some benefits. A whole life insurance policy allows you to grow your wealth over time, and, actually, at some point, you can quit paying on it, and the dividends will cover the payments. It builds cash value so you can cash it in. Term life is typically just that, life insurance for a specific term. Typically 20 or 30 years. As long as you pay, the policy is in force. At the end of the term, that’s it, it’s done, and you will need to get a new policy, typically more expensive. There are other types of life insurance; some are variations of these two basic types, so ask your agent. Be careful to assess your individual risk before spending too much on life insurance; you may find that having a minimum policy and investing the rest is a good long-term strategy.
Disability insurance: There are typically two types of policies: short-term and long-term. Check it out and ask yourself if you are hurt and cannot work, what will your family do?
Long-term care insurance: Now this is an interesting one. The question is whether you need it or not. Some say the odds are you will need long-term care at some point, and if this is your position, the key is when to buy it and how much coverage to get. It ain’t cheap. Then, if you plan well when you are young, could you self-finance it if you do end up needing it? My suggestion is to do your homework and stay informed. A lot of folks are not.
Specialty insurance: There are all kinds of specialty insurance you can buy, either as supplements to your existing policies, such as jewelry, gun, etc., for your home, cancer or other health policies, and travel insurance should you travel internationally and your policy does not cover international travel (be sure to check this one out if you travel…)
Here is the bottom line with insurance, at least in “the world according to Dave: Have enough insurance so that if you have a bad day, the financial disaster does not turn into a bad life. At the same time, don’t become insurance poor to the point that it negatively affects your ability to live a good life.
FIRE
FIRE stands for Financial Independence, Retire Early (Note 1), and is a process in which a person, when young, intentionally sacrifices today for tomorrow. The goal is to work extremely hard for 10 to 20 years, retire, and live the rest of your life on your own terms. It’s the ultimate in deferred gratification but, if successful, you enjoy a very long retirement. You can Google it or click on the link in Note 1 to learn more. I’m guessing few of my readers are working toward this, but if you are young it may be something to consider. If you choose to live this way, you have my respect. I follow two FIRE folks, and I’m always learning from them and recommending their books, which you can purchase from the links in Note 2 and Note 3.
Summary
Depending upon where you are in your financial journey today, it was either a repeat of what you already know or perhaps new information that will help you along the way. Stay tuned for more “other things to think about” next week.
That’s all for this week!
How Much Money Do I Need To Retire? Part 8
Afterburner Success Partners
What’s in it for me?
We all want financial security, don’t we? Rather than leave it to chance, let’s get on a path so we can know for certain! And that’s what’s in it for you this week!
Call to Action
Have you completed your financial template? If not, do you need more time or do you need help? If you need more time, then be sure to take that. If you need professional help from a financial advisor or tax professional, then seek that as well. If you would like to work with me one-on-one, that is also a viable option. In any case, take action today!
Recommended Resources
Your financial professional, tax advisor, accountant, mentor, or family are all resources available to you. If you’re interested in working with me, please don't hesitate to let me know. Throughout the course, I use various media to motivate students to succeed. I’m going to recommend one that I usually show toward the end of the class now. Click on the link in Note 1. What are you going to do with what you have?
Up Next
How much do I need to retire or what’s MY Number part 9
Notes
Please note that as an Amazon Affiliate, I may earn a small commission on the sale of any of these recommended resources.
FIRE: https://www.fidelity.com/learning-center/personal-finance/financial-independence-retire-early-FIRE
Financial Freedom by Grant Sabatier: https://amzn.to/4jTnOlm
Buy This Not That by Sam Dogan: https://amzn.to/4mLwgEQ