This blog is a wrap-up of the last one where we talked about the first of six key areas in your finances, your Current Position.
What have we learned
If you have developed your Current Position you will have a budget and an asset/liability statement showing what you own and what you owe. You’ll know whether you are saving or investing monthly and for what purpose: retirement, a home, car, vacation, education. You’ll also have a sense of how wisely you are using your money. Is it a tight budget with little room for random extravagance or are you letting several dollars slip through each month with scarcely an idea of the benefit you reaped?
Knowing your Current Position will help you think more clearly about your goals. How many are there, can they reasonably be attained, do some need to be added or changed? Completing this step also will answer this question, “What insurance policies do you have?”
Insurance for . . .
Insurance comes in so many shapes and sizes. For that reason there is substantial opportunity to make a mistake when purchasing. Start with these questions. What kind do you have, what benefits do they provide, and at what cost?
Insurance is not a particularly pleasant topic for most people. The idea of needing insurance conjures up an unforeseen event, and not a positive one. Why do we even need insurance? Mainly to replace things we can not afford to lose.
Things like our income, our home, our autos, most or all of our money due to major medical bills, lawsuits or other liabilities that might befall us. Clearly these types of issues are unplanned, statistically unlikely occurrences. We may increase the likelihood of one or more of these mishaps occurring depending on our lifestyle, but otherwise they are random misfortunes.
The Prudent Person Must Act Accordingly
When we accept that we need protection against certain situations, we can begin to look for ways to get or improve our protection. Heading down this road can be confusing, complicated, expensive and generally difficult to make buying decisions. That’s another reason why individuals are reluctant to start. Adding to those negatives is the perception–and sometimes the fact– that sales staff may be more focused on earning their commission than on making sure the buyer is getting the best product for himself at the most attractive price.
Yes, ethics may and do come into play. This issue has become a major focus for regulators and legislators over the last few years. Terms like suitability, fiduciary, broker-dealer, agent, and registered representative fill our industry writings. New guidelines and in some cases rules are emerging after prolonged debate and periods of commentary. I’ll explore the most important aspects of this situation in my next blog.