The purpose of the first phase of the Wealth Matrix is to get your financial house in order—to establish a solid foundation from which you can safely create more income and invest.
Below are the milestones that my 5 Day Weekend collaborator Garrett Gunderson and I recommend that you achieve before moving on to the next phases. These milestones give you a healthy financial baseline and much greater safety and security.
Get Properly Protected Auto Insurance With 5 Day Weekend Lifestyle
Suppose you were to cause an accident. The other driver is disabled and can’t work for six months. Would your current coverage cover the situation? Do you understand the different components of your policy enough to know?
Few people understand the limits of liability component of auto insurance, which covers bodily injury, as well as compensates for uninsured and underinsured claims. Suppose someone else hits you and you’re disabled for six months or longer. He only has $25,000 of coverage, but you make $150,000 a year. Assuming your limits are high enough, your underinsured coverage will make up the difference.
Understand the difference between property value (cars, computers, etc.) and human life value (meaning your potential to produce). Strangely, most people insure their property value but are woefully under insured when it comes to their human life value. What’s more important: Replacing your income if you are disabled, or replacing your car if it gets damaged?
Homeowners Insurance
If you were to have a liability claim on your homeowners insurance, have you fully transferred your risk and protected your assets?
Is your liability limit the same as your car insurance? Do you have the proper amount of property coverage, including full replacement (as opposed to actual value)? Do you have a video inventory of your belongings off premises? Is your deductible the right amount? Have you maximized your multi-policy discount in coordination with your auto insurance?
Excess Liability/Umbrella Coverage
An umbrella policy is absolutely essential for proper protection. It can also reduce your premium on your car and homeowners coverage if coordinated properly. For example, you can lower your liability coverage on your auto and homeowner policies to the minimum requirements, then use the umbrella policy to cover catastrophic losses.
Disability Insurance
Most disability cases are temporary. But even temporary disability can have a devastating impact on your family. Could you handle having no income for three months or longer? How much sense does it make to protect your car and not protect yourself and your income?
Medical Insurance
Do you have adequate medical insurance? Do you have the proper deductibles to minimize premiums and yet keep proper peace of mind that your benefits are not out of reach compared to your liquidity and frequency of use with the policy?
Life Insurance
If you were to die today, would your life insurance replace your economic value and ensure the same lifestyle your family currently enjoys?
You can’t consider life insurance as a big lump sum that is paid when you die. Rather, it must be considered as how much income that lump sum can produce over your family’s life. You’ll never find a widow or widower who felt that he or she had too much coverage.
Do you understand the different types of insurance and do you have the right policy for you? Do you have the proper beneficiary assignment with your policy?
Estate Planning
Estate planning determines what happens to your assets when you pass away. But equally important is the perpetuation of your values, philosophy, vision and contribution. A proper estate plan maximizes your legacy—both financial and personal.
Do you have a properly documented will? Do you have a properly executed trust? Do you have a Power of Attorney set up in case you are incapacitated and cannot make decisions? Do you have a legacy plan or statement of purpose in your trust? Does your plan account for transferring human life value assets (values, philosophy, contribution)?
Liquidity: Checking and Savings
Are you confident in the solvency and quality of your bank? Do you have nine months’ worth of expenses in a liquid account that is totally safe? Do you have at least one month of expenses in cash on hand and another month in precious metals?
These are all worth exploring. Next, I’m going to speak about how to maximize your financial efficiency.
What are your thoughts on your current insurance situation? Does your coverage include the points we’ve just made? Thank you for sharing.
Secure your copy of the “5 Day Weekend” book. 5 Day Weekend: Freedom to Make Your Life and Work Rich with Purpose [Nik Halik & Garrett Gunderson]
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