You've probably heard this statement once or twice in your lifetime. Parent's use this cliché statement in an attempt to motivate their children. However this is only half the answer to success.
Unfortunately some of us are never told the other half. Which is work "smarter" hard work really pays off! Some of the hardest working men and women I know get paid the least. Of course the amount of money needed to achieve success is relative, the path required is similar. If the difference in achieving success or not, is due to lack information or drive, then something is wrong.
Not only does financial stability require hard work in order to reach success, but you must also work smarter and make wiser choices.
There are many tool's available to help achieve success and build wealth. Some will seize the opportunities and others won't. Regardless of skin color, ethnicity, gender, or political orientation, those who take full advantage will most likely reach success. At the same time those who are skeptical, cynical, or refuse to take advantage of the same tools will fall short of their goals.
Whatever the reason, lack of drive, lack of motivation, or lack of persistence, everyone has access to the same information and knowledge these day's. No longer can anyone use the old excuse of ignorance, bad school system, or anything of the sort. Information is available at the touch of a screen (i.e. Cell Phone, Tablet, etc.).
Today, I am very excited to share with you a financial tool that has been around for many generation's. Although it has evolved and has many new application's than its inception, the purpose is still the same.
The Not-So-Secret Financial Tool
Have you ever asked yourself, "What will my family or I do if I lost my ability to earn income?". Not many people like to think about this potential issue. Yet experiencing set backs and loss is apart of life. We'd all love it if life were perfect and losses never occurred, but that will never be the case. So knowing this truth, it's in your best interest to address the issue before it addresses you.
If you haven't already figured it out, I'm talking about the miracle of Insurance. There are a plethora of different type's of insurance for various reasons, but they all serve the same purpose. To indemnify.
Every business owner, investor, or property owner owns some type of insurance policy to protect their investment's. In most cases the law requires insurance on certain properties or individuals.
Some of the most common types of insurance are:
- Health Insurance
- Disability Insurance
- Life Insurance
- Home Owner's /Renters Insurance
- Car Insurance
- and many more...
It's extremely important however, that you understand when is insurance suitable, depending on your needs. Seeking the advice and help of a licensed professional goes without saying.
Every state in the U.S. has their own law's, restriction's, & requirement's in the buying and selling of insurance. Both the company and the agent must be properly licensed in the state where they wish to sell insurance. So when working with any company, agent or a broker, ask them for their license number and then verify they are actively licensed in your state, via your state's dept. of insurance website.
*The "National Association of Insurance Commissioners" (NAIC), regulates all 50 states.
What is Insurance & How can it help?
It's too bad that most people have a negative opinion about certain types of Insurance. Yet they rely on other types of Insurance that will replace their cell phone or TV, if heaven forbid it went on the fritz!
The tool of insurance can be much more beneficial when properly used.
First off, what is insurance and how can it help us?
Simply put, insurance was created and designed to help "indemnify" an individual/family/business, in the event of a loss.(Indemnify means to replace that which was lost)
In other words when you pay a monthly contribution or "premium", into a pool of money (where other people just like you also contribute), the Insurance company is able to cover an individual loss, when needed.
Since most people don't have cash reserved for every potential loss in their lives, they can transfer that risk (along with other people), at a low monthly/yearly premium to the insurance company. The insurance company then holds on to the money and either saves it or they invest the money in other stocks or indexes.
If you elect to have your insurance company invest a portion of your monthly/yearly premium, make sure they explain exactly how it works.
Ask questions like :
In other words when you pay a monthly contribution or "premium", into a pool of money (where other people just like you also contribute), the Insurance company is able to cover an individual loss, when needed.
Since most people don't have cash reserved for every potential loss in their lives, they can transfer that risk (along with other people), at a low monthly/yearly premium to the insurance company. The insurance company then holds on to the money and either saves it or they invest the money in other stocks or indexes.
If you elect to have your insurance company invest a portion of your monthly/yearly premium, make sure they explain exactly how it works.
Ask questions like :
- Can my monthly premiums potentially lose money or is it protected against loss? ( Floor)
- What is the highest amount of a return your company offers, in the event of a positive return on investment? (Cap)
- Where do you invest my premium's? How are they invested & how are positive gains credited to my account?
- What is the monthly/yearly cost of this type of policy? What other fees are charged, if any?
- What is the surrender period(The amount of time when you can't withdraw your investment without getting penalized)?
There are many different restriction's and regulation's for each different type of Insurance policy offered, and they differ from company to company. So it's important that when purchasing an insurance policy, you and your agent go through the laws, rules & regulations.
As they say in the military, "You have to cover your 6!!". AKA, "Watch your behind!". But I digress.
Types of Insurance
Over the years new industries have bred new types of Insurance. Here is a list of a few types of Insurance that are offered today:
- Health Insurance
- Life Insurance
- Home Insurance
- Renters Insurance
- Travelers Insurance
- Car Insurance
- Key Person Insurance (Business)
- Cell Phone Insurance
- Electronic Device Insurance
- and many, many more...
It's sad that most people are more concerned about insuring frivolous property such as their cell phones, computers, laptops or tablets rather than insuring the more important things in life...i.e. Their own life!
I always tell my clients, "You have to treat your personal life the same way your boss treats their business. You must protect against any and all losses". People are more concerned with keeping up with the Jones's... Wait, sorry, the Kardashian's... And they forget about saving and investing in future earnings.
The biggest investment in life is not always your TV or cell phone. Although I know for some it is. Whatever the medium is for generating your monthly cash flow, make you you have a back up plan just in case. If that is your electronics device, for work, the it better be insured.
The biggest investment in life is not always your TV or cell phone. Although I know for some it is. Whatever the medium is for generating your monthly cash flow, make you you have a back up plan just in case. If that is your electronics device, for work, the it better be insured.
Protecting Your Investments
Going back to the idea of working smarter, not just hard. It's important that we protect our means of making money. Whether it be rental properties, place of business, your commuting vehicle, or in most cases it's only YOU.
I'm sure everyone has heard the old wives tale, that your home is your biggest investment. As we learned post 2008, that statement is not always true.
Let's keep things in perspective. The house you live in, is only an investment if you buy it with the intention to sell or rent it (at any time in the future).Even then, while you are still paying the mortgage you don't really own the house, the bank does. In this scenario the only thing you really own is a mortgage.
Which is why you are forced to buy home owners insurance by the mortgage company. Naturally they want you to protect their investment.
So if the house you live in & pay the mortgage for is not currently bringing in positive cash flow, then you may want to place some eggs in another basket. Just encase the housing market falls just before your about to sell and retire. If the housing market were guaranteed to always go up then you'd be right to think your house is your biggest investment.
Since there are no guarantees in life, it's probably a safe bet to remember another important investment.
You!
You are your biggest investment.
If you are currently the only reason there is monthly cash flow coming in, then your ability to earn must be protected. Your ability to get up every morning, go to work, and bring home the bacon (as it were), needs to be protected, just in case. (i.e. Health/Life/Disability/etc. Insurance)
So with that said, ask yourself, "Is my biggest investment protected against a potential loss?".
Let's get one thing clear, you don't necessarily need life insurance to protect your family. If you have the cash, then you can "Self Insure" against a potential loss.
If that's not the case then you may need Life Insurance. But how do you know which type to pick?
Different Insurance for Different Situation's
Life Insurance
There are many different factors to consider when selecting a life insurance policy. I wouldn't be doing my job if I didn't tell you the best way to figure this out, is to speak with a licensed professional. But it never hurts to have a little knowledge before hand.
When choosing a life policy for you and your family, you need to take stock of your current life situation. A few questions to ask yourself are...
If you answered no to any or all of these questions you may benefit from life insurance. Just like car insurance is a must have, so is life insurance. If your car were to get wrecked then your car insurance company would replace or fix your car. What if you get wrecked?
Basically, in the event that you pass away prematurely or naturally, what obligations will be left behind, if any? You can add that amount to the death benefit of your insurance policy. Of course life insurance is not mandated by the government like car insurance or home insurance, so you're technically not required to buy it. But you're also not required to eat healthy, but it's probably a good idea to do so.
If life insurance were mandated when a young couple had a child, not only would it protect each parent if the other died, but it would also get them into the habit of saving and preparing for the future. In my opinion people don't buy life insurance due to lack of information from licensed professionals. In my experience, everyone has a friend, or a friend of a friend who had a bad experience with a life insurance policy. Therefore they think they are protecting themselves by NOT buying a policy. The reason for these policy issues, in most cases, was due to a misunderstanding of the policies requirements and or non payment of premiums. That's why you must know the rules to the game!
It's like I always say "If you don't know the rules to the game, how could you ever expect to win?".
________________________
When building a house, you need tool's. When fixing a car, you need tool's. When building wealth, you need tool's. When protecting your wealth, you need tool's. Bottom line. Utilize the tool's that are around you. The tools available are not reserved only for the rich. However they are reserved for those who seek them out.
Seek and you shall find. Most people are more concerned with finding the negative aspects in life. Inevitably they find it. Start looking for wealth and you will find it.
Let's keep things in perspective. The house you live in, is only an investment if you buy it with the intention to sell or rent it (at any time in the future).Even then, while you are still paying the mortgage you don't really own the house, the bank does. In this scenario the only thing you really own is a mortgage.
Which is why you are forced to buy home owners insurance by the mortgage company. Naturally they want you to protect their investment.
So if the house you live in & pay the mortgage for is not currently bringing in positive cash flow, then you may want to place some eggs in another basket. Just encase the housing market falls just before your about to sell and retire. If the housing market were guaranteed to always go up then you'd be right to think your house is your biggest investment.
Since there are no guarantees in life, it's probably a safe bet to remember another important investment.
You!
You are your biggest investment.
If you are currently the only reason there is monthly cash flow coming in, then your ability to earn must be protected. Your ability to get up every morning, go to work, and bring home the bacon (as it were), needs to be protected, just in case. (i.e. Health/Life/Disability/etc. Insurance)
So with that said, ask yourself, "Is my biggest investment protected against a potential loss?".
Let's get one thing clear, you don't necessarily need life insurance to protect your family. If you have the cash, then you can "Self Insure" against a potential loss.
If that's not the case then you may need Life Insurance. But how do you know which type to pick?
Different Insurance for Different Situation's
Life Insurance
There are many different factors to consider when selecting a life insurance policy. I wouldn't be doing my job if I didn't tell you the best way to figure this out, is to speak with a licensed professional. But it never hurts to have a little knowledge before hand.
When choosing a life policy for you and your family, you need to take stock of your current life situation. A few questions to ask yourself are...
Are you married?
Do you have children who depend on your income?
Do you have a mortgage or any other debt that depends on your income?
Do you plan on paying off your mortgage one day or do you plan on refinancing every 5 years?
Are you rich and have enough money saved to pay off your debt and support your dependents, if you passed away prematurely?
Are you immortal?
etc.
If you answered no to any or all of these questions you may benefit from life insurance. Just like car insurance is a must have, so is life insurance. If your car were to get wrecked then your car insurance company would replace or fix your car. What if you get wrecked?
Basically, in the event that you pass away prematurely or naturally, what obligations will be left behind, if any? You can add that amount to the death benefit of your insurance policy. Of course life insurance is not mandated by the government like car insurance or home insurance, so you're technically not required to buy it. But you're also not required to eat healthy, but it's probably a good idea to do so.
If life insurance were mandated when a young couple had a child, not only would it protect each parent if the other died, but it would also get them into the habit of saving and preparing for the future. In my opinion people don't buy life insurance due to lack of information from licensed professionals. In my experience, everyone has a friend, or a friend of a friend who had a bad experience with a life insurance policy. Therefore they think they are protecting themselves by NOT buying a policy. The reason for these policy issues, in most cases, was due to a misunderstanding of the policies requirements and or non payment of premiums. That's why you must know the rules to the game!
It's like I always say "If you don't know the rules to the game, how could you ever expect to win?".
________________________
When building a house, you need tool's. When fixing a car, you need tool's. When building wealth, you need tool's. When protecting your wealth, you need tool's. Bottom line. Utilize the tool's that are around you. The tools available are not reserved only for the rich. However they are reserved for those who seek them out.
Seek and you shall find. Most people are more concerned with finding the negative aspects in life. Inevitably they find it. Start looking for wealth and you will find it.
