Category Archive: Insurance

Our Financial House – The Foundation

After digging and pouring the footer for our house, it’s time to set our foundation.  Our financial foundation needs to be solid, stable, and able to support the weight of our financial house.

Three components of a solid financial foundation -

Insurancefoundation

At present, my wife and I have health insurance, term life insurance, disability insurance, automobile insurance, dental insurance, and renter’s insurance.  We also have an umbrella policy that protects us from events not covered by our renter’s or automobile insurance.  In the future, we plan to purchase long-term care insurance.

Ever few years, I review my policies with a qualified professional.  My wife and I believe in several ounces of prevention.

Debt Reduction

My wife and I really enjoy living debt free.  (It rocks!)  Our hope is that we can live the rest of our lives without borrowing money.  (We might make an exception for the purchase of a house.  At present, we live in a house provided by my employer as part of my compensation.  If I were to change jobs and we were to move, we would either rent or take on a mortgage, depending on what was right for our family at the time.  For the sake of this article, I’ll be speaking of non-mortgage debt.)

If you have high-interest debt, it’s time to get angry and do something about it!  Making minimum payments and dealing with credit card companies isn’t any fun.  Make a plan, eliminate your debt, and then move on to the really important things in life.

Emergency Fund

My wife an I have an emergency fund (roughly) equal to six months worth of expenses.  We built this emergency fund immediately after paying off our last debt.  The peace-of-mind it provides is priceless.  (While we were paying off our debt, maintained a smaller emergency fund between $800 and $2000.)  The amount in an emergency fund will vary, depending of family size, location, employment situation, and comfort level.  We sleep better at night, knowing that we have an emergency fund in place.

Pouring and setting a solid foundation can be back-breaking work.  Dealing with a financial foundation can be extremely taxing – mentally and emotionally.  I know, for me, it was overwhelming when we first began the process of getting out of debt.  I was embarrassed by many of the financial decisions I had made in my past and I felt somewhat lost as to where to begin.  Thankfully, I was able to connect with some good friends who had good advice and, little-by-little, I was able to make some very positive changes.

Go slow.  Understand what you are doing.  Keep things simple.  Move forward.

Start with a good, solid foundation – and the rest of the building will (almost) build itself.

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Several Ounces Of Prevention

An ounce of prevention is worth a pound of cure.

-Benjamin Franklin

Moving beyond the day-to-day management of my personal finances, it’s important that I think about strategies which will promote long term financial stability.  Lately, I’ve been thinking about insurance, end-of-life documents, and organization.  Mundane topics, to be sure, but it pays for me to focus on these areas now, so that I do not need to worry about them in the future.

End-of-Life Documents -

Let’s face it, it’s never fun to think about death – especially our own – but if you have a family, you need a will.  My wife and I updated our wills, with the help of our lawyer, back in July.  In the state of Georgia, the state recommends an advance directive for health care, which combines provisions of a living will and a durable power of attorney for health care.  Both my wife and I have filled out and signed a copy of this form.  I have also created a durable power of attorney, as has my wife.  We keep our end-of-life documents in a fire-proof safe.  We also keep copies of them off-site.

Insurance –

We have health insurance, term life insurance, long term disability insurance, renter’s insurance,  automobile insurance, and umbrella insurance.  At some point in the future, we will purchase long term care insurance.  Our life insurance policies are equal to twelve times our annual salaries.  We have renter’s insurance because we live in a home that is provided by my employer.  My employer insures the home, we insure its contents.  The umbrella insurance is a new policy, and provides for coverage above and beyond our renter’s and automobile policies.  The long term disability has a 180 day elimination period and our automobile policy has a very high deductible.  We have an emergency fund in place to handle most emergencies.  Our insurance is designed to protect us in the face of a catastrophe.

Organization -

I’ve really worked hard to improve my system for organizing documents.  I like to sort regular bills by date, and then by year.  I keep several years’ worth of bills in a closet, filed away should I need to reference them.  Important documents, like our wills, birth certificates, car titles, social security cards, and marriage licence, are stored in our fire-proof safe.  Copies are kept off-site.  I have three copies of our income tax records.  Two copies are here at our house, and another copy is kept off-site.  I’ve also digitally copied and stored several important documents.  As a precaution against fire or flood, I’ve video-taped the contents of our home, and I keep a copy of that tape off-site.

I’m hoping that some upfront-preparations will prevent down-the-road hassles.  I’m trying to take the necessary steps, now, so that I can relax and enjoy the future.  There’s no point in working hard to make money, and even harder to save it, if I don’t take the time to protect it.

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My Car Has Been Repaired

A few months ago I hit a deer with my car.  After a little internal-debate about whether to have the car repaired or trade it in for something newer, I decided to keep the car and have it repaired.  I happy to report, the car has been repaired, and it looks great.

I have a high deductible – $1000 – and it felt a little strange writing a check for that much money for repairs on a nine year old car.  Thankfully, I actually have a budget-category, labeled automobile repair, from which I withdrew the deductible payment.

It’s so important, when creating a budget, that I remember unplanned-for expenses.  My wife and I own three automobiles, each with a $1000 deductible.  Instead of relying on our emergency fund, which is really there to protect us should one of us lose our job, we prefer allocate funds, on a monthly basis, for the specific purpose of paying our deductibles.  Each month $250 ($3000 / 12) is set aside, in my ING Direct Orange Savings Account.  Since the accident occurred last year, I used money allocated in 2008 to pay for the repairs.

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The Insurance Adjuster Has Given Me An Estimate

A few days ago, I called my automobile insurance company and informed them that a deer had hit my car.  The insurance adjuster just left, and he gave me an estimate of $2500 to fix the damage done to my car.

Now I have a decision (or two) to make.  Just a few days before the collision with Mr. Deer, my wife and I talked about selling my car (and my old pickup truck) and buying a newer truck.  I’d love to have a truck that was big enough to carry our whole family.  There are five us, and we can’t fit in my standard-cab F-150.

Out of pocket, I’m looking at a $1000 deductible to fix the car.  I really don’t feel like spending that much money, especially on a car that I might sell anyway, but I don’t want to drive around in a busted car, either.

Right now, I’m thinking about -

1.  Paying the $1000, having the car fixed, and keeping the car.

2.  Paying the $1000, having the car fixed, and selling the car.

3.  Selling the car, as is.

If I keep the car, I’ll keep the truck.  The truck will not sell for all that much, and I am not going into debt to buy the newer truck.  If I sell the car, I’ll also sell the truck.  I’ll take the money I make an put it towards a newer truck.

I’ll let you know what I decide.  Right now, my gut tells me that I’ll just pay the $1000 and keep the car, but I think it’s worth running the numbers, just in case I can find a good deal on a used truck.

Click here to read about how I paid cash for our minivan last year.  I’ll use a lot of the same techniques when / if I decide to buy a newer truck.

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