Protecting Your Assets and Yourself

Pillar #4 of the 5 Pillars of Financial Resilience micro-training series is all about protection!

A powerful financial foundation is like rich, nourishing soil where you plant a tree. In this case that tree is YOU and your one precious, freaky life. 

These 5 pillars form your nourishing financial foundation. If you haven’t yet watched the training on the first 3 Pillars, head off and do that now.

Pillar #1 is about understanding money and financial leadership and management. Go here to check it out.

Pillar #2 is knowing that only assets create your freedom and learning how to get them into your life and working for you. Get Pillar #2 here.

Pillar #3 is understanding debt, and knowing the difference between consumption debt, neutral debt and expansion debt and what to do with each to accelerate your journey to freedom. Access the Pillar #3 training here.

Pillar #4 is all about protection and the three layers of protection you need to put in place to protect you, your loved ones, your assets, and your ability to maintain and create your wealth and freedom. 

Watch the Pillar #4 video now.

Protection is a key part of your financial wellbeing. 

One of the things that is so devastating and depleting when we don't have our financial house in order is the deep anxiety that goes with this terrain for so many people. 

It’s as though financial anxiety is just the way we live our lives – waking up at three in the morning wondering…

► What would happen if I lost my job or income source?  

► What would my family do? 

► What if I got sick and couldn't earn? What would happen to those that depend on me? 

► If died, how would the people that depend on me financially survive?

And often the underlying anxiety isn’t about a specific thing. It’s just an ongoing worry about whether you’re going to be financially okay in the future.

We are vulnerable. And not knowing how much is enough, or exactly what we need to ensure our wellbeing now and in the future, is exhausting. 

One of the roles of money is to provide protection. 

Your safety is money’s first job. 

We all need to know we have the bottom of Maslow's hierarchy firmly sorted in our lives in order to get to the higher levels.

We need to feel safe before we can feel powerful and free.

Money's first role is to ensure our basic needs are met. Having a roof over our heads, access to food, access to opportunity… so we can earn money! 

Warren Buffet said…

❝ When the tide goes out
you get to see
who's been swimming naked ❞

Through the crazy Covid pandemic and ensuing economic turmoil there was a tectonic shift globally in the economy and financial sectors. In the process the tide went out and we got to see just how many people had been swimming naked in their financial worlds. 

Naked by living deep in debt, paycheck to paycheck, with none of these protection elements in place. 

Covid was a great wake up call to understand that without these protection components, we cannot be fully in life. 

If you are walking on a financial knife edge, you can’t spread your wings and fly (or even dance). 

► PROTECTION LAYER #1 – CASH

Your first layer of protection is your cash emergency fund.

We all need a stash of cash for “life's to-be-expected, unexpected events.”

Having a cash emergency fund ensures you don't go into debt or raid your assets when life happens.

The next component of your cash protection is a cash safety net. 

You need to build up a cash reserve of three to nine months of your basic living needs as your cash safety net.

NOT three to nine months of your income, and NOT three to nine months of your current lifestyle costs.

Get very clear on your BASIC LIVING NEEDS. You don't want your cash safety net to be too big because you don't want a load of cash sloshing around doing nothing. 

► What is the minimum monthly cash you need to keep a roof over your head, food on the table and access to opportunity?

This “savings net” is in addition to your investing.

Saving and investing are two different things – and you need both in your life.

► PROTECTION LAYER #2 – DOCUMENTS

The second layer of protection comprises your wealth documents. 

You need a will. 

A lot of people think a will is only for people who've got a whole lot of money or assets. 

No! 

A will is there to speak for you when you can’t and says…

“This is how I want my life to be wrapped up in the event of my death.”

Intestacy means you die without a will in place – so your life gets wrapped up and distributed according to the laws of “the state.”

This includes how any assets you have get distributed, and if you have minor children, who gets guardianship of them. No will means assets get sold.

So “intestate” means that government or “state” rules determine all of those actions. Plus it's a terribly drawn out hideous process. Dealing with an intestate estate is horrible. Don’t do that to anyone you care about. 

Get a copy of The Wealth Chef book and follow the steps on what you need to do to get a simple will in place.

WARNING!

Do not go and get one of those “free” wills from your bank or financial advisor.

There is no such thing as a free lunch, and there's definitely no such thing as a free death. 

There is a HUGE catch with these “free” wills.

What happens is that the bank or advisor puts themselves in the will as the executor of the estate. This means they could take between 3% and 7.5% of your estate when you die.

WTF?

You also need to put in place documents called Power of Attorneys and/or Directives. One is your Financial Directive (or Power of Attorney), and the other is your Health Directive. 

Your will is for when you die and your PoA’s or Directives are when you’re still alive but can't speak for yourself for some reason.  

These documents nominate somebody you trust to act as you, for and on behalf of you and in your best interests. 

Your financial directive would give them authority to open or close bank accounts, to move money, to pay bills for you, and so on. 

Your health directive spells out what you want to happen regarding health care and end of life choices. Do you want to be kept on life-sustaining treatment? What are the end-of-life conditions you want? 

You might be thinking… 

❝ Ann, what the hell has
this got to do with my
financial wellbeing and freedom? ❞

EVERYTHING, ACTUALLY!

When we understand that the root of all this is freedom we see that we can have dignity, self-determination, and freedom from worry, right to our end.

We can decide what we want the end to include – and who we trust in some of these most vulnerable life stages to act on our behalf. 

That’s what getting these documents in place is about. Because when we have done it, we can stop worrying about it.

► PROTECTION LAYER #3 – INSURANCES

Your final layer of protection is made up of insurances. 

There’s a whole section on this in The Wealth Chef book.

The most important thing to know is that most people are either grossly over-insured or under-insured, very few people have got that fine line of “enough.” 

Insurance is sold on fear. It’s your job to NOT buy into the fear-mongering. 

Insurance is a necessity, yes, BUT it’s vital you aren’t pouring money down the drain. 

Insurance is there to cover a gap that you have. It's there for a big cataclysmic event that MAY happen.

Insurances are not investments. 

Please do not fall for these hideous products where they bundle insurances and investments together. They are never good for your wealth, only good for the person who sells it to you.

Get really clear on what insurances you need – and how much you need – and then shop around like a crazy person.

Most importantly don't buy insurance products out of fear – or just because an advisor tells you you should have it. 

➤ That’s Pillar #4 of your Wealthy Ecosystem!

Remember, wealth is a learned skill and a skill everyone of us can learn.

When you have a step-by-step guide telling you what you need to know and how to get it into your life, it is so much easier to do.

Let yourself be supported and guided, you don’t need to do this alone.

Big love

Ann

P.S. You can continue the wealthy conversation on the Facebook Community Page (it’s free to join) and see what others are saying. We’d love to hear your stories about cash crunches and relatives leaving a mess to sort out. Share the details – thousands of Wealth Chefs in-the-making visit the group each week for juicy wealth snacks, insights and inspiration as they create their juicy financially free lives. Your ideas and shares may trigger someone to have a big breakthrough.