Insurance and Managing Risk
An often overlooked area of personal finance is managing the risk of loss and protecting against those unexpected expenses. Unfortunately there is a general stigma and dislike of insurance and people who sell insurance thanks to some bad apples in the industry. However the truth of the matter is there are definitely periods of your life where insurance is absolutely required. The question for you is, what do I need now?
1. If you have dependents, take an insurance needs assessment to ensure you have adequate life insurance coverage. If your family relies on you as a source of income, you need to put some serious thought into how they would make ends meet if something were ever to happen to you. Your family’s future is too important to leave to chance, you need to make sure you have adequate coverage in place. Term life policies are suited best for most young professional who are not swimming in $$$, and should cover their needs until they can build up adequate savings to self insure. There are some great calculators out there to help you determine your needs.
2. Start building up an emergency fund with 3-6 months of living expenses saved. According to a recent study by the Canadian Payroll Association, 47% of working Canadians would find it hard to meet their expenses if their paycheque was delayed by just one week. If you were to suddenly face a major expense or become unemployed, how would you pay your bills? To achieve some peace of mind, we highly recommend building up an emergency fund in a high interest savings account with at least 3-6 months worth of living expenses saved. Just knowing you have that cushion can make all the difference between constant stress over money and having some peace of mind.
3. Get a will and personal directive in place. Our own mortality is probably one of the least fun things for any of us to talk about. However, in order to not leave your loved ones in a lurch should the worst happen to you, it is a very important thing to think about. A will is a legal documents which list your wishes and directions for what will happen to your assets should you pass away. A personal directive is more focused on the treatment options you would prefer in the event you are unable to provide instructions your self. Both documents can be drawn up with the help of your friendly neighborhood lawyer, or with online services.
Risk Management is not a sexy subject for most, but it is an important one. If you can take the actions recommended above, you will certainly find more peace of mind for yourself and your loved ones, and you can get back to living that awesome life you want.
If you’d like some additional support with making a change, please setup an initial connection meeting with us and learn more about how Finovo can help you get better control of your finances.