Insure for Catastrophe, Not Inconvenience! | Series 6.6

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Welcome to the EnjoyMore30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

Joseph Okaly: 00:00:16

Hello, and welcome once again to EnjoyMore30s

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Family Finance podcast. Every week, I'm here trying to talk to

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you about money so you can take those steps forward, gain that

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confidence and therefore really remove that financial anxiety

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that you may be having so you can focus solely on making your

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life more enjoyable to you and to your family. This series is

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all about the new year, and the new you along with that, Setting

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Your Compass for the New Year.

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As always, if you like what you're hearing, please make sure

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to subscribe, follow us on Apple podcasts wherever you listen.

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Clicking that star, leaving those reviews, it really really

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does help us reach the other of millions of other young families

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out there that are just like you.

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So far this season, we covered setting your compass with your

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spouse. So pretty much joint goal setting, then we discuss

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the importance of actually paying yourself first, you know

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giving some of that hard earned money to yourself each month to

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reach the goals that you would actually want to to make you

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happier. And then we covered bucketing your goals. So setting

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separate accounts for each goal. That way you can easily track

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them, you can more easily achieve them. And then the next

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episode was kind of an extension of this with what I call money

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blocking. So again, setting funds aside, but this time is

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setting them aside for kind of those smaller daily things that

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monthly massage, kind of things like

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that. Finally, last week, reaching the importance of using

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the right fit for each investment. So we've got those

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buckets, but we want to make sure we're using the right

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investment for each one. Too conservative may mean not

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reaching your goals. So if you've missed any of those

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episodes yet, I would definitely obviously recommend you check

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them out soon.

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Today's episode is titled Insure For Catastrophe, Not

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Inconvenience, exclamation point where we are going to cover the

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mentality that I would recommend when looking at which pieces of

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this trip we're designing are the most important to insure.

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What parts of this ship are actually worth insuring? So the

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goal for today's episode is to understand that there is

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insurance for pretty much anything that you want to buy

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insurance for out there. But this general concept of

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catastrophe vs inconvenience can really help you know what is

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worth insuring, and what maybe isn't. When you think of all the

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parts of this ship, there are some that are just going to be

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more important than others. But you may be able to get insurance

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if you really wanted to on any of them. That doesn't mean that

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you should. Insuring the hull of the ship, for example, though,

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is much more important than say insuring one of the nails on the

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ship. If the hull breaks, we're kind of in a big problem, though

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the whole ship is pretty much worthless, the journey is lost,

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you know, we don't want any of that to happen. If one nail

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comes out, comes loose, breaks, that ship keeps on going. And

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you can afford to put in another nail.

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If you think of your daily life, there are certain insurances

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that everybody has. Homeowners insurance, for example, you

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cannot have a mortgage without having homeowners insurance. The

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bank says you really need to have this because if the house

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burns down, we don't want to lose our investment our loan

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that we made to you. Now generally, it might add, say,

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you know, $100 a month to your your budget, something kind of

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like that. So it's something that's affordable, you know, we

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don't enjoy paying for it, but it's affordable. If they didn't

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make you get homeowners insurance, though, if they

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didn't make me specifically get it, I would still 100% have it.

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The reason is because if my house God forbid, burned down, I

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don't have $400,000, sitting to the side to you know, rebuild my

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house in the next week or whatever it might actually cost.

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That would be a catastrophe that would basically ruin my family

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financially. On the other hand, I can get insurance for

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somethings normally in the form of an additional warranty or

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something like that for let's say, my washing machine. But I

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don't know if my washing machine goes, it will be annoying. I'll

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be kind of irritated. I'll have to buy a new one. But it's not

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going to ruin me by any means financially. I can come up with

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a few 100 bucks if I have to, you know and getting a new

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machine. It's an inconvenience, not a catastrophe. Now, if you

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want to get insurance for your washing machine, that additional

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warranty you can but the point is that there's a difference

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between insuring things that if you get the insurance or not,

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you know, it's going to be okay either way. First things where

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if you don't have the insurance, it's going to be a catastrophe,

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and you may be ruined financially. So this is a big

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deal, if you don't have the proper coverage. Cars can be the

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same way we have to get the insurance, but don't need to buy

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the additional warranties. So if you again, if you had the

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financial flexibility, the additional warranty makes you

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able to sleep at night. Sure, you know, go ahead and get it,

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that's your call. And sleeping at night is you know, that's

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important. But as a rule of thumb, you again want to just

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really make sure that you're insuring for those catastrophe

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scenarios at a minimum.

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And the thing is, from what I've many times seen, people tend to

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not insure for all the catastrophes that they should.

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They may insure their iPhone, but not their lives, for

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example. Homes, cars, those are easy, because they make you get

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the insurance, you don't have a choice many times. They don't

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make you get life insurance, they don't make you get

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disability insurance. And as a young family, dying or becoming

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disabled, you know, they're not on your top of your list to

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think about, but both of these kinds of things are protecting

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your greatest asset. The most important asset that you have as

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a young person, and that is your future earning potential. So

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over the next 30 years, this is likely to add up to millions of

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dollars. Life insurance is really the easier of these two,

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because as a young healthy person, you might be able to

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get, say a 30 year term insurance policy that has a

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value of 1 to $2 million or more and not have to break the bank

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financially, it depending on where you live your health, you

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know, it could be maybe $100 a month, you know, in that kind of

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just very, very rough general range.

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Disability insurance on the other hand, because you are

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actually much more likely to be disabled than you are to die as

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a young person, it can be a little bit more. But again, you

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can kind of tailor it any way you want. If you want to say you

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know have to wait for six months for the cover to to kick in

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instead of three months then it's cheaper. So like in New

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Jersey, the state provides you with some short term disability

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for this first six months. So that makes sense for somebody

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living in New Jersey, that that kind of thing. But again, we're

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focusing on the catastrophic. If you can't work for three months,

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you know, it would kind of stink, wouldn't be great. But

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you're likely to recover for that. If you can't work for 2

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years, 5 years, 10 years, that's a really big problem. So there's

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that catastrophic scenario kicking in again.

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The last catastrophic kind of thing, which isn't exactly

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Overall, there are a ton of times that you come across

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insurance, but it's an add on that I really want to put in

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here is that we see way too many young families with kids that

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don't have a will or their other important legal documents. So

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who will raise your children? Who will be in charge of their

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insurances, warranties, things of that nature, that you can

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finances? These are huge decisions. Is getting a will

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fun? Absolutely, 100% not, you have to think about yourself

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dying, not fun, but it's very, very necessary. And the line

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that I always share with young people is, and this is the one

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buy, and we can't cover all of them here today. But just

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that motivated me, if I was to die today is the relative that

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would be the loudest and the most convincing in a courtroom,

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would that be the person I would actually want to raise my child?

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So more times than not when I say this to a young family, I

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see very anxious faces and you know, looks going back in

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remember this higher level concept to help you in that

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between the you know, the husband and the wife. So, you

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know, this is something that motivated me, and I've seen it

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motivate other people as well.

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decision making process. Understand that there is

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insurance for almost anything, but this general concept of

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catastrophe versus inconvenience, can help you know

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Thanks for tuning in today, as always, and join us for next

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week's episode called Diversify, But With One Advisor, where

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we're going to cover some very important differences between

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what is worth insuring what you have absolutely have to insure

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diversification vs having multiple advisors. And why you

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don't need the latter, the multiple advisors to have the

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former diversification. Again, a fancy way of saying spread out

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your money well.

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Overall, if you are able to implement what we cover today,

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like your life, or your income potential. And what you know,

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that's great. That's fantastic. You have less to worry about

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than before and you can focus more on just really enjoying

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your life. If you are wanting help with these things though,

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always remember that feel free to reach out to me ask

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questions, check out my website, www.enjoymore30s.com. That's

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maybe isn't necessary, like you know, the washing machine.

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enjoymore30s.com There's an Ask Joe section on there. Shoot me

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an email and just reach out I'd be happy to help any way that I

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can. Until next week. Thanks for joining me today and I look

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forward to connecting with you soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax, or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor, Member FINRA/SIPC.