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 you plant a tree in. 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 watch it.
Pillar #2 is knowing that only assets create your freedom and learning how to get them into your life and working for you.
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.
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’ve got to live our life – 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 I died, how would the people that dependent 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 OK in the future.
We are vulnerable, and not knowing how much is enough, or what we need to ensure our wellbeing now and in the future is exhausting.
One of the roles of money is also 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 your basic needs are met. Having a roof over our head, access to food, and 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 this whole crazy COVID pandemic there has been 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 have been swimming naked in their financial world. It’s been quite an eyeful!
Naked by living deep debt paycheck to paycheck with none of these protection elements in place.
There’s been 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 what you BASIC LIVING NEEDS are. 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 amount of money you need to keep a roof over your head, food to keep you alive, 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.
Go read this article detailing what your cash emergency fund and cash safety net needs to comprise of if you don’t have these in place in your life yet. >>> https://thewealthchef.com/need-emergency-fund/
PROTECTION LAYER #2
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.
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 and so your life gets wrapped up and distributed according to the law of the state.
This includes how any assets you have get distributed, and if you have minor children, who gets guardianship of them.
So intestacy’s means the state or the government 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.
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 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 a bank account, to move money, to pay bills for you etc.
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?”
When we get that the root of all this is about freedom we see that we can have freedom, dignity and self-determination right to our end.
We can decide what we want our 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, and when we have done it, we can stop worrying about this.
PROTECTION LAYER #3
Your final layer of protection is made up of insurances.
There’s a whole section on this in The Wealth Chef book and you can also read more about what type of insurances you should have, and NOT have and how much in this article.
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 and it’s your job to NOT buy into the fear mongering.
Insurance is a necessity 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 and always 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.
In the comments below I’d love to know…
- Which of these three layers of protection do you have in place?
- Which layers don’t you have?
- Was there anything in this article that surprised you?
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.
P.S. The FREE New World of Wealth Workshop starts on Nov 23rd.
Get all the details and secure your place at this link.