Planning

What is wrong today? 

If there are difficulties today you can look to at least one of several causes:

  1. Some negative and unexpected event has come your way. The car broke. You lost your job. The bank reduced your line of credit. Your spouse left. Your mother is sick. You are sick. There are no shortage of possible negative things.
  2. Some expected negative event has finally become urgent. How many payments behind can you get on the electricity bill before they shut it off?
  3. Some defense to a negative event has stopped working. The term life insurance has renewed at a price you cannot afford. Your group insurance has exceeded the maximum and you need more dental work.

The general case

Today’s problems are the result of yesterday’s deficiencies either in anticipation or selection of a solution. Today’s problems reflect errors we have made earlier.

A common mistake

Taking the first obvious solution that comes along. Don’t use a temporary solution and create a permanent problem

Understand the situation in some depth.

Problems come in four groups

  1. They are costly and improbable. Premature death, a house fire, a car accident. All are insurable.
  2. They are costly and probable. War zones, high risk activities like drunk driving and hard drug use, long term high risk activities like smoking. No insurance will be available. Avoidance is the only viable option.
  3. They are low cost and probable. Group insurance covers some of these. Routine dental, medication for non-chronic diseases, minor accidents. You can minimize premiums by using deductibles well.
  4. Low cost and low probability. Ignore them. Leaving your umbrella at a restaurant.

Assess the context of the problem

  1. Decide what low cost means to you. Affordable is the key.
  2. Assess the solution set. Prefer a low priced solution over a better value one that addresses just part of the problem.
  3. Anticipate future changes. Cheap now, better quality later is viable for many.
  4. Address priorities. Some problems are unmanageable if they occur. Deal with them first.
  5. Assess priorities regarding spending. Are McDonald’s hamburgers worth the risk of no insurance?

Everything is context

You are today what you created yesterday. You cannot prevent tomorrow’s problems without understanding where you are today. Even that will not cure them all. Hold a reserve fund for the truly unforeseeable.

Use planning to void setting yourself up for failure.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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