2/17/2018


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You Are Your Greatest Asset

You can manage your own financial independence!

Most people do not consider themselves to be an asset. Many people think of an asset as something that costs money. Others think of an asset as something that generates income or a profit. I view an asset as anything having some type of value and value can be defined as monetary or non-monetary.

Do you consider yourself valuable? I'm sure your friends and family would think so. You bring value to each of them because they enjoy having you in their lives. In addition, you probably provide value by producing income. this may be in the form of a salary, an hourly wage, by making wise investment decisions, or through other sources of wealth creation. If something were to happen to you, in most cases the level of income you produce would be drastically reduced or even eliminated. Such an event could cause a significant lifestyle change for both you and your family. So why not treat yourself like any other asset? While you can't always protect the non-monetary value you generate as a person, you can make sure that the monetary value you provide is protected.

I am shocked by how many people in the United States do not have any medical insurance. The dollar expenses associated with a hospital stay can quickly escalate into the tens of thousands over very short periods of time. For an injury or a disease that requires long-term treatment, the medical costs can become astronomical. Even brief doctor visits for minor accidents can result in large dollar amounts. Not paying such bills can haunt a person's credit report for a lifetime and lead to ongoing financial duress. Before an investor saves a dime, he should invest in medical insurance for himself and his dependents.

Besides needing to pay for medical treatment, people also need to continue to pay their normal living expenses. When you get sick, the world keeps on moving and the grocery stores, the power and phone companies and your landlords and lenders continue to expect timely payment. Let's assume you are the sole or co-provider for your family. What would happen if you were to become disabled or sick for an extended period of time? How would your family make the mortgage or rent payments, maintain an automobile and keep food on the table? Would their lifestyle have to change in a negative fashion? I realize that these are depressing thoughts, but a wise investor must prepare for the unexpected.

How do investors protect themselves and the value they produce? A logical response is to take care of oneself by eating well, exercising and getting enough sleep. One can also avoid activities and occupations that cause excessive risk such as bungee jumping and skydiving. But sometimes people get sick anyway and sometimes accidents just happen. This is why prudent investors purchase insurance.

Disability insurance is a means of protecting a portion of an individual's income when a disabling accident or illness no longer allows this person to conduct his or her normal work activities. Most people do not fully insure their income dollar-for-dollar as the costs for such insurance can become excessive. However, purchasing disability insurance to provide enough income to support a person and their family during times of distress should be strongly considered.

Some employers provide varying types and amounts of disability insurance for their employees. An investor needs to evaluate whether such policies cover them while only on the job or if they are also covered outside of work. In addition, the payments terms should be researched as well. I have often seen employer provided policies that cover only a fraction of a person's normal income. In such cases, it may be a wise investment to purchase an outside policy to increase the total dollar amount of coverage.

Retire Richer And Faster is a masterful compilation of facts, figures, and ideas that can work to anyone's advantage when retirement is on the horizon. Robert E. Lawless has made retirement planning a lot easier, and without a doubt, this book should be read by everyone who wants to retire comfortably.

 

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