I recently had a conversation with a very nice couple from Greensboro, NC. They both worked as realtors, had three children and seemed like they were doing a good job executing their financial game plan.
As the housing market has been doing well, they have managed to sell more in the last year. They both know that things won't stay this way forever, so they put aside a good amount of money each month for their "rainy day fund". Having the discipline to this and stick to it is rare to find these days, so I told them they were doing an awesome job.
We continued to discuss their other financial issues. They had a decent amount of life insurance on themselves (they probably could have used a bit more) and had started a retirement account as well. This was especially encouraging because it can be a difficult task when one, or in this case both, of the spouses are self-employed. Nobody is deducting money from their paycheck for them.
I was starting to think they didn't need me at all. However, it didn't take long to discover there was one potential landmine that needed to be addressed. I asked them a basic question. "Do you have enough money put aside to help pay bills if you are sick or hurt and can't work?"
They thought about it for a minute and said, "Well, we could dip into our savings."
"You're right. You can do that. But is that what you are saving for? To cover bills?"
They hadn't considered this so I offered a better alternative. "If you couldn't work, you wouldn't have that income. Sure, one of you could pick up some of the slack, but do you want to go through that? Your savings should be for things you want down the road, like a vacation or to buy a nice car. No one saves to pay bills."
"Let's do this," I suggested. "Let's take a look at disability insurance. The premiums won't break your budget but it could keep you from having to go through your savings."
They agreed to look at a few options. As we move through the process I'm sure they will both complete applications. And since they are both fairly young and healthy, they should both have policies to protect their paychecks soon.
Are you setting money aside each month for a rainy day or something fun like a vacation or a boat? Do you really want to have to dip into that money to cover your bills? What if you could shift that risk to an insurance company and let them cover your bills?
If you are a business owner, a contract employee or otherwise self-employed, ask an agent to help you find a disability policy that fits your needs.
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Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life, disability, long term care, cancer, accident and other insurance coverages in North Carolina, South Carolina, Virginia, Tennessee and Georgia. He's also is a professional speaker helping sales people be more productive and efficient, and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!