Having a rough idea of what your future should look like is not enough to ensure a comfortable retirement. A financial plan won’t guarantee you’ll enjoy your golden years, but it can help you work toward making it happen. So what is this magical financial plan? it’s a comprehensive assessment of your current financial status, an overview of your short-, medium-, and long-term goals, and a strategy to help you achieve them.
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build a financial plan
Your financial plan should be unique. but there are certain goals that everyone considers, like buying a house and having children. Some people plan to buy a car or a vacation home, while others plan to focus on starting a business. Some people value the trappings of luxurious everyday life, while others prefer to save their money for yearly trips abroad.
Whatever you want in life, write it down. click to tweet
Whatever you want in life, write it down. And since mapping out the rest of your life can be challenging, break your financial plan into five- and ten-year block stages. Now that you know where you’re trying to go, you can create a roadmap that gets you there.
Start by compiling a list of your assets and liabilities. They include bank account balances, property, investments, credit card debt, and loans. Now that you know where you stand, review the feasibility of your goals and set deadlines for reaching certain milestones. Then you’ll need to budget for everything from housing and health care to clothing and entertainment. try to identify areas where you can cut back to increase your retirement savings or double down on debt elimination. this strategy can help you reach your goals much faster. just make sure you have the proper safety nets in place, like an emergency fund and insurance.
the role of insurance in your financial plan
Insurance is an essential part of any sound financial plan. being prepared for the unexpected will ensure that you can still achieve your goals after facing a financial crisis. and an insurance policy will prevent you from emptying your emergency fund. Insurance can also protect your loved ones if you are injured in an accident, become ill or disabled, or die. Certain situations can be expensive for those without coverage, so it’s important to purchase whatever policy you need based on your financial situation. most experts recommend making sure before taking the investment seriously.
While you won’t need every type of insurance available, everyone should have health insurance.click to tweet
While you won’t need every type of insurance available, everyone should have health insurance. Anyone who owns a car should have auto insurance and anyone who owns a house should have a homeowners insurance policy. If you have children or a spouse, it’s also a good idea to take out life insurance.
If you’re working, disability insurance can guarantee you a source of income when you’re too sick to work. those nearing retirement may need long-term care insurance. And if you’re lucky enough to have more than $1 million in savings, you should consider liability insurance in case you ever have a lawsuit.
Unfortunately, people tend to skimp on insurance. according to gallup and sharecare, 12.2% of us uu. Adults did not have health insurance in the fourth quarter of 2017. More than a third of Americans do not have a life insurance policy. and while 95% of homeowners report having home insurance, 64% of homeowners are underinsured. not having enough coverage is almost as dangerous as not having everything insured.
why we avoid taking out insurance
Although most of us know that having insurance is important, buying a policy is usually not a top priority. And it doesn’t seem as easy as reaching other financial goals, like bolstering your emergency fund by having the money automatically transferred to your savings account. Buying an insurance plan also forces you to consider the worst possible outcome, such as losing your home to fire or flood. some people are paralyzed with fear and avoid the subject of insurance altogether.
When it comes to insurance, consumers also tend to be uneducated. Navigating the insurance market can be confusing, and policies don’t always include the protections people expect. That’s why so many people don’t have the insurance coverage they need.
It may not be fun, but it’s important to do your own research and compare insurance policies. Don’t let a lack of understanding stop you from developing a financial plan that takes into account all of your needs. reach out to a trusted advisor, financial planner, or unique online resource (like this blog) to find the help you need. we’re here to help you understand insurance on your own terms.
don’t set it and forget it
Sticking to a financial plan is just as important as developing one. Each year, you’ll want to review your plan, track your progress, and make any necessary adjustments. If you need help along the way, consider working with a financial advisor. try to find someone with a cfp or chfc designation, which ensures that the advisor is an expert in the field of financial planning. Tools like the smartasset financial advisor mix and the national association of personal financial advisors (napfa) search engine can help you find the right financial advisor.
Have questions about how home insurance can fit into your financial plans? contact a hippo specialist. we’re here to help!