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Finance Guide

Only insure against catastrophes you can’t afford to pay and then get coverage from the best firm possible.

It is amazing how many people insure packages at the post office but go without disability insurance. Self-insure against as many losses as possible, and start a self-insurance fund with monthly deposits. In the meantime, get insurance at the companies with the best claims records (not the lowest rates) to cover the big stuff you could never pay yourself:

  • Long-term disability coverage – if the loss of employment would devastate you financially.
  • Term life insurance – if there are others who’d be put in dire straits by your death.
  • Catastrophic medical coverage – take as big a deductible as your self-insurance fund permits.
  • Homeowners insurance – don’t forget flood and, if appropriate, earthquake coverage.

Although we tell as many jokes about insurance salesmen (not being one ourselves) as the next guy, the fact is that insurance is a useful product when used properly. A bias against all insurance is as foolish as naively treating insurance as a complete financial program. Getting objective advice from a professional not receiving the commission may make you more confident when you do work with an insurance agent (whose commission will then be well-deserved for selling you the right product).

In 2024, once you have an estate over $13.61 million ($27.22 million for married couples), you can afford to speak with a financial planner about your estate, and you can’t afford not to do so. But there are many elements of estate planning that are relevant to everyone (including those with an estate too small to worry about estate taxes): wills & living trusts, durable powers of attorney for health care and financial decisions, living wills, and directions and love letters for those you leave behind. All are worthwhile to consider. There is a lot of useful information and some interesting books and software available for purchase through Nolo Press for those who cannot afford the assistance of an attorney. Of course, no general information, such as that available at this site, can substitute for professional advice.

The secret to investing is to figure out what’s going to go up the most and then buy it. But nobody can actually do this, and the consequences of putting too much in one place can be devastating, so it is probably best to put your money everywhere.

Diversifying your portfolio all over the globe is no longer difficult, and you don’t need a lot of money to do it. For example, a single fund, Vanguard Total World Stock Fund, includes well over 6,000 companies throughout the globe.

However, the most important decision is not the selection of the specific investments, but the level of growth you’ll need and volatility you can accept in your investments to achieve your specific financial goals. And for many people, tax considerations will have a major impact on their strategy.

It is virtually impossible to build wealth without developing the habit of spending less than you earn. For some people it may be as simple as setting aside 10-20% of every paycheck and just finding a way to make do with the remainder. For others it may require detailed planning and monitoring of spending.

The accumulation of wealth is not an end in itself: planning implies the achievement of objectives, and spending money for desired ends, while it may reduce your net worth, is the whole point of accumulating the wealth in the first place. Goals differ, and it is important to discover your own dreams.