If you planned to jump between trapezes or walk a high wire, you wouldn’t even begin until you saw a net securely in place. No one wants to think about falling, but your net would catch you safely if you did.
Reaching your money goals is no different. It’s essential in your journey to Financial Freedom that you prepare for the unexpected.
You need a Safety Net.
Identify Your Safety Net Gap
Remember the story of Goldilocks and the Three Bears? Goldilocks wanted the perfect bowl of porridge. She invested time in assessing her options and consciously choosing what was “just right” for her.
We can learn a lesson from Goldilocks. Before you start shopping for insurance, take inventory of your family’s financial situation and crunch your numbers. Module Four of Financially Fit Bootcamp includes a Safety Net calculator perfect for this assessment.
The calculator helps you tackle the following three questions:
- How much money would you need to feel Financially Secure in the event of a lay-off, health crisis or other catastrophe? This is your safety net.
- What’s your ability to “self-insure”? That is, what financial resources do you currently have in place?
- Finally, what’s your “safety net gap”?
When you’ve built your Freedom Generator, you’ll have closed that gap entirely and created an impenetrable wall of self-insurance around your family. In the meantime, you’ll need to outsource the coverage of that gap to someone else.
That’s where finding an advisor and purchasing just the right amount of insurance come in.
Choose The Right Advisor
Goldilocks didn’t let a commissions-based advisor or insurance agent sell her a Papa Bear-sized bowl of porridge, and neither should you. Once you’ve calculated the value of your safety net gap, you’re ready to find a professional who can connect you with the tools and resources to fill it.
If you’ve been looking for a financial advisor and have had a bad experience, don’t give up. Not every advisor is a good fit for every person. But there are advisors out there whose priority is giving the right advice to your family.
Here are a few things to look for when you meet with a prospective advisor or agent:
- How is the advisor paid? Does he or she have a financial interest in selling you a pricey policy?
- Does your advisor have a spirit of collaboration? You want a partner who’s dedicated to using his talents and resources to help you achieve your financial goals.
- Does your advisor ask you detailed questions upfront about your lifestyle and financial objectives? Good advisors and insurers want to understand your family’s needs, so they can tailor a solution to you.
Once you find a trusted advisor, you can discuss what kinds of insurance you need and purchase those coverages. Check out the Specialist Panel here to take a look at some potential, no BS advisors we’ve hand-selected from across the globe.
Revisit Your Insurance Costs Annually
Because your life circumstances will change.
Your family’s needs will transform dramatically as you have children, acquire property, care for aging loved ones and more.
Additionally, the gap in your safety net should be getting smaller and smaller as time goes on. After all, you want to be making measurable progress in a reasonable amount of time on your goal of achieving Financial Freedom.
Your ability to self-insure should increase every year, so your family will become less dependent on your insurance coverages.
Since your circumstances are constantly changing, your plan to fill your safety net gap must evolve as well. Every year, take the time to re-evaluate your numbers and weigh your financial needs against your insurance coverages.
Set a reminder on your calendar to look over your insurance one year from when you started coverage. If you find at that time that your own assets have increased and you now have too much outside coverage, you can dial down your insurance to just the level that you need.
Now you’ve liberated some cash you can use to accelerate your pathway to Financial Freedom and your ability to self-insure. You’ll be able to swing that trapeze with the confidence you’ve got a solid safeguard beneath you!
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image credit: Bigstock/Flynt
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.