Insurance

Okay, so I got out of order with that last post... actually - goal development is something that you should take plenty of time to review and develop. This should be done concurrent with getting your financial "ducks in a row", so maybe it wasn't that untimely after all.

At any rate, I had alluded to a discussion of insurance as one of our next topics. This will likely take several posts to cover things completely, as there are so many kinds of insurance, and so many issues to address with each kind. In this post, I'll simply list and describe the various different kinds of insurance, with the more important types (IMHO) listed toward the top of the list.

Health - what's more important to protect than your and your family's health? Coverage options here include comprehensive, major medical, and specific treatment plans, like dental or vision coverage.

Auto - another important type of insurance, as most states (including Illinois, where I'm located) require liability and medical expense coverage on your automobile. In addition, depending upon your requirements and the age and value of the vehicle, you may wish to carry collision, comprehensive, and/or some of the other options available.

Liability - in our litigious society, everyone should have coverage for general liability. For many folks, the liability coverage in their HomeOwner's (HO) policy may be adequate, but we'll discuss this separately from HO coverage because of the importance.

Homeowners - damage or loss of your house, your posessions, and protection from liability for you is what is provided by a HO policy. Here again, there are many variables to consider, so we'll discuss it separately.

Disability - this is coverage in the event that you become disabled and are unable to work at your current job. There are several types of disability policy available that we'll discuss. In my opinion, no one with financial obligations (i.e., bills to pay, family to support), should be without disability coverage.

Life - once again, this type of coverage is a necessity for anyone who has financial obligations. The array of policy types can be confusing, so I'll try to explain these as clearly as possible.

Long-Term Care - this kind of policy has gotten a lot of attention in the past few years. It is important to consider whether this makes sense for you, and then to consider all of the options within the policy(s) that could make the difference as to whether or not the coverage is adequate. LTC insurance is not for everyone - sometimes it just doesn't make sense. We'll discuss this in the LTC section.

So - there you are. Over the course of the next several posts I'll be taking one type of insurance at a time, explaining the types of policies, options available, and customized coverages that each type of insurance covers.

'til then -

jb

Planning for Your Goals

Goal planning is the real "meat" of financial planning. That is to say, once you've covered the issues we addressed in the earlier sections - organization, developing and improving your net worth, and providing for the safety issues, it is now time to consider exactly what you would like to do with your money and your life.

This is a very personal set of decisions - no one person makes the same decisions here. Perhaps you'd like to open your own business, and become your own boss. Maybe all you'd like to do is to finish working for the State of Illinois after 30 years and spend your time playing with your grandchildren. Or maybe you're finishing up college and now you're beginning to earn some money, and you're planning on buying a home.

Setting your goals is very important as you begin a savings and investing plan, because without a goal in mind, it is difficult if not impossible to "map" your way there. Of course, if all you'd like to do is save money for the fun of watching the amounts increase - that, in itself is a goal.

Assuming that you're not just saving money for the fun of it, a few guidelines are helpful in setting these goals. As you may have learned in other contexts, useful goals are SMART - Specific, Measurable, Action-Oriented, Realistic, and Time-bound. I'll explain these further as they relate to financial goals:

Specific - determine the cost of your goal. Maybe you'd like to purchase an RV and travel about the countryside. Find out what the cost of an RV is, as well as other costs associated with this goal. When do you want to do this? Be as specific as possible when describing your goal. With this information in hand, you've got an idea of how you can get there from here. Since you went through and organized your information, you know where you are now (financially), and soon we'll begin actually developing a plan to reach your goal.

Measurable - by knowing the cost of your goal, you can begin to measure your progress toward your goal year-by-year (or month-by-month, quarter-by-quarter, etc.). This is important so that you can see that you are progressing as expected, or maybe unforeseen events have slowed your progresss, so that you have to make adjustments to your plan.

Action-Oriented - by ensuring that your goal is action-oriented, you can easily visualize yourself enjoying the fruits of your labors once you've reached your goal. It is important psychologically that you have this kind of incentive. Visualization is a very powerful tool which helps us to achieve our goals.

Realistic - if a goal is unattainable, it doesn't do anyone any good. That doesn't mean that we should only pursue the easy things, because "stretch goals" are an important way to push ourselves beyond our comfort zone to achieve things we didn't think we could. Make sure that your goal pushes you to new heights, while at the same time maintaining a reasonable expectation.

Time-bound - as mentioned in the "Specific" section above, you should put a timeline on your goals. Set the date to achieve your goal in a "Realistic" fashion, which will then make it "Measureable", as well.

Now - begin developing your dreams and goals. Brainstorm, think of your heart's dreams, and reach for the stars. In the next posting, I'll begin discussing how to lay out plans to achieve these goals. Until then, have some fun developing goals -

-til then,
jb