Smooth The Road: Plan & Invest. Edition Four, October 2022.
Imagine you have a big fancy machine in your shed. Now picture that machine being a money machine, it’s main function being to spit out twenty dollar bills all day long.
Would you keep the shed unlocked? Would you let the machine gather dust and rust? Would you cross your fingers and hope it keeps going?
I’m thinking the answer is probably no for the majority of people. My guess is that you’d take good care of that machine, going in every day to clean it down. You probably have it locked away with a padlock, or you may have even gone the extra mile and had a state of the art security system put in.
Would you insure it?
Well you are that machine. Everyday, every week, you get up and go to work and your aim is to spit out dollar notes. The reality is that many of us don’t look after that machine, and we certainly don’t insure it. It’s inevitable that at some point that machine, you, are going to break down.
So lets look at the stats. 1 in 3 people are off work before age 65 for six months or more in their lifetime due to illness or disability. If you’re 35 years old on an income of $70,000, you never get a raise again, and work until age 65, thats 2.1 million dollars of potential future earnings. If you're reading this it's probably safe to say you have the intention of increasing your income over your career, so that number becomes even greater.
Do you see what I mean by your biggest asset? Is that asset worth insuring? I consistently come across clients that have their house, car, and contents well insured, but have forgotten about their biggest asset, their ability to trade time for money and generate an income.
For financial planning, its hard to design a plan for clients without some form of income protection. Why? Because most plans rely on income coming in on a consistent basis to generate wealth. If the income stops or becomes the bare minimum (benefit), so to does the plan. Income protection insurance means that if something were to happen to you, the plan can still continue to operate how it was designed even when one of lifes many events gets in the way.
My recommendation? Talk to your financial adviser about income protection options. The earlier in life you get this set up, the more money you will save in the long run.
This newsletter aims to help New Zealanders on the path to financial freedom with tips and tricks from the professional financial planning process. Stay tuned for more handy insights and knowledge.
If you're ready to take the next step and want to look at how working with a financial adviser for your planning and investment needs may benefit you, please reach out for an initial no-obligation chat - I would love to hear from you.