So as a CFP professional, we help clients each day with managing their cash flow and managing how much they need to set aside and particularly an emergency fund. That is a very important piece that we plan, especially for younger clients who are just getting started. It's the first goal really that we want them to build out to have that stability, as they begin their career. Can save a little bit at a time and then if something unexpected happens, such as a health event or something happens with their car, they have the money there. That it's very easy transition and doesn't cause a big disruption in their life to where they have to take on something like credit card debit or other things that they do. So when we talk to them, we essentially talk about two things. The first thing is where are you going to save it? And then the second thing is how much? So if we're thinking about how much for most clients, that's going to be 6 to 12 months of living expenses for them, depending on the job, the stability. Whether they're married, for example, it might be a little less, because they might have a spouse who works as well. Otherwise, if it's just the one income, it's probably going to make sense to have closer to that 12. Once they establish that fund, it's just important to set that aside and where is it going to go? And so what that as we think about it, it's an idea of because we want that to be the stable part of what they have, we put that normally in a bank account. Sometimes it's an online bank account where they can get a little bit more yield, but it's still readily available and liquid. We don't want to put that in the market. because if something happens in the market, one, they can lose part of that emergency fund. Number two, when they're forced to sell, they might be forced to sell at a bad time in the market where it's down and it's a little bit harder for them to get that. It's a little bit less liquid. And so, we're working through those tradeoff their clients. For all their clients, a little bit different. Most of them have that emergency fund already established. However, when we think about cash flow, there can be a little bit different needs with where does that money come from. So for example, we just had a client who sold their home or in the process of selling their home, I should say and bought another. Because of the way it played out, they had to buy the other before they sold their actual home. So, they had a cash need of a couple of hundred thousand in the meantime. And for them, it was looking at the options. So essentially, they had three. So they could sell it from the portfolio, which would mean taxes and trading costs, which you didn't really like that idea. They could take off on another mortgage for really what was going to be a few months, which there's costs with getting the mortgage and then there's usually a higher interest rate associated with that for the short amount of time and looking into can they pay it off early? Does that make sense for them? The third and what made sense was what's called a pledged asset line. So it's essentially something that not a lot of people think about, but it's borrowing against the portfolio. It was a lower interest rate for them. Something that is short-term. So in this case, because they only needed it for 3 or 4 months, it made a lot of sense, but saved them anywhere from 5 to $10,000 based off of how long they used the line. So it's very powerful for them to, as the financial letter, I help them weigh and they give options that may be a little bit outside the box. So everyday, that's different for us and changed on a client to client basis. Insurance of very important to our clients. Risk management, they've worked their entire life to build assets whereas a younger person maybe the most important thing in your life is your ability to work. Insurance can cover you and ensure that the assets that you have built or your ability to work is ensured for the rest of your life. For most of our clients, life insurance and disability is the most important part to start with life insurance. Essentially, we're looking at a few things. The first thing is goals for each of our clients. What are your goals? What do you want to do in your life? So for some of our clients, that might be college. They need to, if one of the spouses were to pass away, they need to pay for college. They need to pay off the mortgage. To be able to essentially, what we're using insurance for is stability and peace of mind for the opposite spell that something would happen. Hopefully, in an ideal world will never need it. But a lot of the times and in the most important times, they do need it and that's when the SFP professional and us comes in to to talk through those goals and to figure out what is needed and then what is going to be there, essentially to be able to offset that need? So for most people, that's assets. You could sell your house, you have your savings that can offset that need and anything that's more, anything more than the need, you're going to have to make up with insurance. At our firm, what we think about as insurance is purely to insure against that risk. It's not an investment tool, we want you to save in the stock market and in the bond market, depending on what makes sense outside of that insurance product. But if you need that specific insurance, we want to get that to you. So if for example, if we have a client who's aged 30. Husband and wife, they have two young kids. Both of them working. Let's say, the wife in this example is to pass away. The husband's now going to have to cover some way to care for their young children. So, maybe that's daycare where as they used to be able to split based off their work schedule. Maybe that's college for the two kids and they both want to go, but now they don't have that earnings to cover it. Now he's got a mortgage to pay on his own, maybe they need to cover that. The idea is not get rich off of insurance, but to cover what the other spouse would and to make them feel comfortable. So, that's kind of number one. Disability insurance is a little bit different, but still very, very important, especially for our younger clients. The chance of something happened with life insurance for you to pass away is actually a lot less than disability. And actually, it's a lot more common for a young clients, specifically to be disabled in your most asset is that of your ability to work and gain income overtime. And so, to have that disability insurance for each client and a lot of the time that's tailored for them. So, they can usually only get up to 60% of their income. And so again, it's the same idea. How much insurance do we need? What assets do we have in place to essentially offset anything that we need? This came actually one of the, really to drives us home and one of the most important examples that we've seen in our clients. We had a client who was a physician who was about 40 years old. They had two young kids and his wife. They were driving. During the holidays, it was an icy road. They went off the side of the road and essentially got in a car accident, which caused his hand to not be able to work as a surgeon as somebody who is using that every single day, depending on the type of disability he would've had. There's essentially two times any occupations. So if he can use, go and teach even though he doesn't have that hand, it pays out nothing. But in his case, he had what's called own occupation, which means he couldn't do his job. He couldn't do surgery. And because of that, he was paid out for the rest of, well, actually til age 65 every single month, essentially replacing the salary that he had lost for the spouse who now had to care for the husband, who was trying to find work and it is a little bit more difficult now, because he can't use that hand. But financial piece of mind, just emotionally how much different it was for them and going forward. And actually, allowed them to really do what they wanted to in life and that is to go back and teach and do different things. It's still make income, but he was getting that income, essentially was the difference between what he used to make and what he is making now, because of disability. So each thing for our clients, like I said is based off of goals, the need and making sure that they are covered in case of some catastrophic loss. The piece of mind is really the key, as we look forward and we help with each client. [MUSIC]
