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Insurance, Financial Planning & Family Psychology

financial planning to protect a family
There aren’t a whole lot of things that are great about getting old. Some of the greatest things about getting old are just “there behind the scenes” making life easier but not terribly out front and noticeable – so some people are tempted to notice only the down-side – losing hair, wrinkles, worse memories, and on and on. But you know one thing that you get a whole lot better at as you get older? Planning for risk and doing something practical about it in advance!
Academic psychologists have done study after study demonstrating the very poor ability that young people have in thinking about risk in a real, practical way. You can imagine why that might be. If you never have known or even heard of a person dying needlessly in a car accident because she wasn’t wearing her seatbelt, then when an adult talks about the importance of always wearing your seatbelt, it’s just a theoretic discussion. Issues about money are the same way.
Perhaps the riskiest time in a person’s financial life is not when you would think it would be – at their poorest time, perhaps when they are students. No! Their riskiest time is right after they get that first big job and the salary starts coming in. After struggling in poverty all through their educations, it is nearly impossible for an old person to talk to a young adult concretely about sober financial planning. The good times – and the big salary – will last forever, right? Well, maybe not. What you understand as you get older is that the times when you’re really bringing in the big paycheck are probably not the best time to “whoop it up.” Especially in today’s economy, the rug could get pulled out from under your feet very suddenly. But your financial obligations do not stop. What about the mortgage, the car payments, the utilities? So many people’s family budgets have a lot of fixed costs that cannot quickly or easily be cut during a down-turn. As an older person will know (probably because she has been through the valley of the shadow of eating pancakes three meals a day!), you absolutely must have a Rainy Day Fund! Second, the Rainy Day Fund must be conceived in sound math-based finance: if you are laid off, how much does it cost to keep the household running until you get another job? Third, that Rainy Day Fund must be FULLY FUNDED before you spend Christmas week in Cabo at the “all you can eat” resort!

Insurance & Financial Planning

The main purpose of financial planning is to help spread out the risk of loss events across a wide population – based on the observation that not everybody suffers losses all at the same time. Your premiums contribute to a fund that covers the other person’s time of troubles at a time when you are flush. Then later, when you face troubles, the fund pays out to you. That’s the basic concept but choosing, buying and using insurance still test all your best financial planning skills. You want to make sure you get the “right” amount of insurance. Rarely do we see people who are “over-insured,” although it does happen. All too frequently, we see people who have too little (or no) insurance against risks that are not as unlikely as people might suppose. Long-term disability is a perfect example. Not to sound gloomy, but industrial accidents, car accidents – any of a broad range of things – can happen. They don’t happen terribly often but if it happens to you, it’s 100%. What is your plan to take care of your family if you get badly hurt and can never work again? Do you have a Jet-Ski parked in the garage but no long-term disability insurance? If you think about it and say it out loud like that, does that sound like family leadership?  It’s terribly irresponsible! The other key element of financial planning that a lot of people don’t think about is the issue of policy deductibles in their automobile insurance policies. Now if you’re like most people, you enjoy the lower premium of a high-deductible policy. And if you’re also like most people, it never really occurs to you that if you haven’t set aside an amount equal to your deductible in your Emergency Fund, then you are exposed to uninsured risk. That might be an inconvenience but not a disaster if your accident is a fender bender. Maybe you just drive around for a few weeks with a less-than-perfect looking car until you’ve saved enough to cover your deductible. But what if the accident you suffer puts your car completely out of operation and you cannot cover the deductible? And what if you need your car to get to work? You can start to see how not having a clearly thought out financial plan can lead to a cascade of failures that can magnify what should have been an inconvenience into a true family catastrophe.

Insurance & Psychology

We are insurance broker, not marriage counselors. But allow us to tell you this – outside of infidelity, can you guess what the number one reason given for failed marriages is?  Yes – money difficulties! The lack of money – and almost as bad, the fear of the prospective lack of money – drives SO much anxiety in the modern age. This anxiety causes marriage strife, poor relations with your children, sleeplessness and worsened physical fitness, poor eating habits and indigestion. It is all completely unnecessary. If you are the type of person who buries his head in the sand because you can’t bear to think about car accidents, disability, house fires, death – and on and on – don’t try to think these things through all by yourself! Our insurance brokerage sells insurance, of course, but that’s not the main or the most important thing we do. We are in the business of thinking. We imagine risk and then help you plan for it so that you can stay ahead of the game and suffer absolutely as little as possible when adversity comes, as it surely will one day in one form or another. The funny thing about the “anxious types” who come see us – after a long session where we have worked through their risk exposure, looked at budgets and planned for all the various scenarios – we can see the relief on their faces as they leave our offices. What they thought was going to be an almost unbearably anxious conversation turned out to be no big deal at all, and they go back home feeling prepared, organized and proud of their family leadership.
Please come see us and let’s help you plan your family’s risk management. The doctor is IN!