Keeping on Top of Your Financial Situation

This is a post I’ve been thinking about for a couple weeks.  It started with a personal experience.  My family purchased a life insurance policy on my grandfather about 15 years ago.  When we bought it (I say “we” although I was only 19 and had nothing to do with the purchase), the plan was for the policy to be in place through my grandfather’s 100th birthday (he was 71 at the time).  We have been paying the premiums, and have even increased the premiums in recent years.

A couple months ago, I decided to examine the policy (it was the first I even knew about it).  I realized that, as the policy was written, and with the happenings in the economy, the policy was now only projected to last through his 91st birthday.  My grandfather is now nearing 86 and is healthy as a horse.  Now we are left with decisions as to how to address this issue.  Do we wait until the policy gets close to expiration before deciding to extend it?  Do we just let it expire, and know all the money we put in is lost?  We are in the unfortunate situation of benefitting if he dies sooner than expected.

The reason this brings me to this post is that, if we had re-examined the policy 10, or even 5, years ago, we would be in a much better place to alter it to last longer.  We should have taken a look every year, or at least every 3 years, to make sure the goal of the policy matched our current situation, needs, and abilities.

This is the same for everyone.  I have spoken to so many people who purchased some insurance years ago, and have not talked to the person who sold it to them since.  Their situations have changed, and their coverage and savings vehicles no longer match their objectives.

I have also spoken with several people who think they have plenty of coverage through work.  I am always happy to evaluate their current benefits, and see if they match the objectives and needs for protection, growth, and tax reduction.

Of course, you will tell me that I am going to find some need just to sell something.  My response is that YOU are going to find a need, and I can help you solve your problem.  Most of the people in my field are really trying to help.  We’re acting like any other professional in that we’re evaluating your current situation and future needs, and developing a plan to get you to your goals in the most efficient way possible.  Usually our time is free, and you are free to take our advice or leave it.  However, please take advantage of our expertise, and help yourself to avoid a bad situation before it’s too late.

Why You Plan

I gave a workshop this week on Basic Financial Planning.  I talked about the foundations of a financial plan, and discussed some of the concepts and vehicles used in planning for your future.  Among these were Life Insurance, Disability Insurance, Retirement accounts, college savings plans, etc.

A few really good questions came out of the session that I wanted to share.

1.  Do I see lifetime employees or business owners saving more toward retirement? My answer was that I see that lifetime employees are much more likely to save a great amount toward retirement.  There is a kind of forced savings in that their employers usually offer some kind of retirement plan.  Entrepreneurs, on the other hand, tend to put as much of their money as they can back into the business.  While this is good when trying to establish the business, at some point they really need to start taking money out and saving it.  They can no longer count on selling their business to provide for retirement.

The irony is that there are so many more options available to small business owners to put more money away for retirement.  There are SEP, SIMPLE, 401k, 412, Keogh, etc.  The people that have the opportunity to put more away, in a more tax efficient manner, are the ones who aren’t taking advantage.

2.  Are people reluctant to buy insurance or do any planning right now? At first people are usually reluctant to talk to me.  They think I’m going to try to sell them something they don’t think they need.  However, we go through some processes, and talk about their present and future needs.  Almost every time I talk to a client, I ask how they feel about their planning so far.  I always get a grin, and they tell me they feel a sense of relief.  They feel good for doing some planning…for taking some control of their financial future.

3.  Can we stop calling it “retirement?” I’ll attribute this to Erica O’Grady.  She told me she has no intention of retiring, nor do most of her friends.  She’s really right.  So many in our generation aren’t going to go for the old school definition of retirement.  We’re not going to stop working completely, buy a condo, travel the country in an RV, etc.  We’re going to keep working, keep volunteering, keep active.  However, we need to make sure we’ve planned enough that we don’t HAVE TO work.  We’ll work because we want to.  That way, if we want to work on writing a novel, or fixing up cars, or running a non-profit, we can do so.

As per Erica’s suggestion, I’m going to start referring to it as Lifestyle Freedom.  Thanks Erica.

Thank you to those that attended and had great questions.