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"Where should I put my money? In certificate of deposits, the stock market, Treasury bonds, annuities, or more life insurance?
"Should I buy disability insurance, a Medicare supplement policy, or a long-term care policy?
"Should I increase contributions to my 401(k) plan, IRA, or TSA?
"Should I trade in my old car for a new one?
"Should I refinance my house?"
Those are only some of the questions asked of me virtually every day.
My standard answer is, "Yes, to all of the above, but if you can tell me when you are going to die and under what circumstances, then I can tell you exactly what to do!"
A fact of life, the sooner learned the better, is this: .
For example, you should buy a long-term care policy, with the highest benefits possible–payable for the rest of your life, in case you should ever have to enter a nursing home. On the other hand, if you never use the policy, its a waste of money.
The purchase can be compared to a homeowners policy. If your house never catches fire, the insurance premiums are wasted. But, for a price, you will have had peace of mind, knowing that if such a terrible event did occur, you are protected.
We make certain that our cars are protected by topping off fluid levels and checking air pressure and tread wear on our tires. We have roadside assistance plans, carry mobile phones, and wear seat belts in order to feel as safe and protected as possible when we drive our cars.
That peace of mind is purchased with time, energy and money. We also have to spend something, or make trade-offs in benefits, to feel financially secure.
The basics of financial planning havent changed in centuries, just some of the options.
I tell my clients that they should have money set aside to meet emergency cash needs. Short-term certificates of deposit or money market accounts are ideal vehicles for this purpose.
The trade-off or cost to attain peace of mind for the emergency fund is giving up buying something shiny or loud today for an unknown need tomorrow. The interest earnings are also less than can be earned on longer-term instruments.
