Are You Protecting Your Financial Foundation Enough?

In this solo episode of the "Nickels and Dimes" podcast, host Natalie Kime emphasizes the importance of protecting your financial foundation. She discusses key components such as steady income, budgeting, emergency funds, debt management, and essential protection measures like life insurance and legal documents. Natalie highlights potential threats to financial stability, including job loss, illness, and market volatility, and offers practical strategies for safeguarding one's financial future. She encourages listeners to be proactive in financial planning, seek professional advice, and share this vital information with others who may benefit.

• Importance of protecting one's financial foundation
• Key components of financial planning: steady income, budgeting, emergency funds, debt management, and basic protection
• Strategies for maintaining financial stability during crises (e.g., job loss, illness)
• The role of life insurance in financial security and wealth building
• Types of life insurance: term vs. permanent insurance
• Importance of health insurance and managing medical costs
• Legal documents necessary for financial protection (wills, trusts, powers of attorney)
• Liability protection and the benefits of umbrella insurance
• The significance of diversifying income streams and proactive financial planning
• Encouragement to seek personalized financial advice and identify gaps in financial plans

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Transcript

0:02

Welcome back to the Nickels and Dimes podcast. I'm your host, Natalie Kime. And today's topic is one of the most important yet most overlooked. Protecting your financial foundation. Look, most of us have probably seen a GoFundMe along the way if we're on social media at all, and there's a lot of reasons people will lean on those kind of fundraising programs. But it usually revolves around either somebody being injured or getting a serious medical diagnosis and not being able to work, or not being able to afford the medical expenses that come along with it. Sometimes it's because someone passed away without life insurance, but either one of those in those situations can leave a family really struggling, struggling to stay in the home, struggling to maintain the lifestyle they've had, and if it was a one income home and the person injured or that passed was the income earner that can really put a family in a difficult situation. The truth is, if you're focused on building wealth, you absolutely cannot skip the foundation building part. We're going to talk today about what protection really means, and how it can give you confidence and control no matter what happens. I'm asking you guys to share this episode today with somebody you know that could benefit from this information. You can either screenshot the episode or share the link to a friend or family member that you think could benefit from this information. But my goal is to always get more information out there that can help people be better prepared, no matter what may arise. Especially when it comes to their finances. So let's jump in today, and let's start by talking about what your financial foundation is. It's actually the structure to everything else you're going to build in your financial plan, and without it, your wealth plan is vulnerable. It includes five key parts. First is steady income. Your income fund, your lifestyle, savings and goals. That income can come from a job, a business, a pension, or passive streams of income you've created along the way. Number two is budgeting and cash flow awareness. You've got to know what's coming in and out each month. And there's tools you can use. There's some great online apps like mint, like um, oh shoot, I can't think of the other one that it's literally escaping my mind right now. But I tell a lot of my clients about it, rocket Money. That's another great tool. You can download that. There are free versions of a lot of those apps, and there's also paid versions that give you reports and different things like that that can really benefit you. But you can also use a regular spreadsheet and build a budget in it. And if you don't have a budget, If you're a spreadsheet person, feel free to reach out to me via the link on this podcast. I'd love to share with you a template I created for my clients a couple of years ago. It's a really basic budget. It's easy to use and easy to track, but it can. It can organize all your information for you, to put you in a position to easily start reviewing your budget and know where your money's at. The truth is that budgeting is not meant to restrict you. It's meant to give your money a job so this portion of your income pays bills. This portion of your income is paying down debt. This portion of your income is is creating savings, whether it's for retirement, a family vacation, funding your emergency fund. Every bit of your money should have a job. Number three is actually the emergency fund. Most Americans could not afford a$400 emergency today if one arose, and that is scary. I've been in that position. I've shared that story before, but a lot of times emergencies that come up cost a lot more than $400. So what are we going to do in that situation? We're going to struggle. We're going to have to ask for help. We're going to have to go without. So a proper emergency fund should cover 3 to 6 months of essential expenses. And I tell my clients all the time, if you are a two income household, I truly believe 3 to 6 months is a good place to be at with an emergency fund. Because if one of you loses a job, likely the other income is still there, so you're not have to replace having to replace 100% of your income. However, if you are a single income household, I recommend that your emergency fund is somewhere like 9 to 12 months because I know for me, when I had to lean on my emergency fund because I'd been laid off from a job, something like that. I was in a senior management position in corporate America, and it took me 3 to 6 months to find a job, and so I would completely drain my emergency fund if it was only a three month fund, and then start leaning on credit cards and creating a situation where I was in debt. So then when I got a job, I had to pay off the debt before I could rebuild my emergency fund. So just something to think about based on where you're at, what your income looks like. How to kind of target what your emergency fund amount should be. An emergency fund can help us avoid those credit cards or loans that we take out during a crisis, and keep us from getting too far behind the eight ball that we have to come back from. On the other side of things, there's a lot of different places you can grow your emergency fund. Definitely. I tell people growing it in a high yield savings account can be good where you earn maybe 3 or 4, little over 4% interest. It just depends on your bank or wherever, wherever you find that that fund. So if you're looking for a high yield savings account, I would definitely look up multiple ones and see what interests they're offering, see what bells and whistles they come with, because they can all be different and figure out which one makes the most sense for you. The other thing that I help clients to do is utilize cash value life insurance, where you can build cash inside of a life insurance plan that you have access to along the way, and it's growing you in even higher, growing for you at an even higher interest rate than a high yield savings account. So maybe splitting up between the high yield savings for immediate need and then longer term emergency fund building within a financial product might work for you or your family, but I would recommend having a conversation with somebody like myself that can help you navigate that and figure out what makes the most sense for you. The fourth one is debt management. It's so important for us to focus on eliminating high interest debt, especially those credit cards I teach in every overview I do with potential clients. About the rule of 72, and the rule of 72 tells us how long our money is going to double for us in a savings situation based on the interest we're earning. But it also works on your debt. And so based on the interest you're paying on your credit cards, it's going to tell you how quickly your debt is doubling against you. So you simply take that interest rate. You're either earning or paying. You divide it into 72. That's the number of years it will take for your savings to double or for your debt to double. It's important to know that information and to have a plan to control or combat. If you're already in a debt situation, that debt growing exponentially and continuing to just build a mountain that you can't get out from underneath. You need to understand those interest rates and have a payoff strategy. Whether it's a snowball approach or an avalanche approach, and if you're not familiar with what those are, you can certainly Google them for a general definition. But again, talk to somebody that understands those things and help you. Help can help you analyze what you have and put together a plan that makes sense for for your budget and your situation. Also, debt management protects your foundation, minimizing what can drain the financial foundation that you've built or that you're working on building. And then the fifth one is having basic protection in place, making sure you have life insurance, disability insurance, health insurance, and that your legal documents are in order. And what what do I mean by legal documents? I'm talking about powers of attorney, financial power of attorney, uh, medical power of attorney. Having a trust in place. A will is great, but it doesn't avoid probate. A trust will avoid probate. It'll also name the person you want to step in if you're incapacitated, to make decisions for you via those medical and financial powers of attorney. So make sure you have those things in place that the people you've named in those roles are aware. Talk to them. Make sure they're comfortable making those decisions for you. Let them know what your wishes, what your wishes are, and make sure that they have copies of those documents should they ever need to step into that role, whether it's temporary or permanent. That basic protection is the safety net that can keep the rest of your plan intact, and without it, absolutely everything can fall apart. And that's why I'm taking the time to spend an entire podcast episode today talking about these things. What components are in a foundation. And this next section we're going to talk about what are the threats to that financial foundation. Well some of the financial curveballs that can shake up everything you've built are things like job loss or business instability, especially in a volatile economy. You need to have a backup plan. Y'all, today is what, April 5th? And if you've got money in the stock market and are paying any attention whatsoever, the last 2 or 3 days have not been your best friend when it comes to what you've been saving and working so hard for now. Yeah, that happens along the way. The market goes up and down, but it's important when we're talking about a foundation, that you have money in places, that it is protected, that you have access to, not just in a place that it's riding a roller coaster constantly, and you're not sure if or when you're ever going to be able to retire, if or when you can ever take a vacation, whatever that might look like for you. So a volatile economy can be a gigantic threat to the stability of your financial foundation. Side hustles, consulting, savings, unemployment coverage. Those are different things that can help increase your ability to save, help. Have something you know on on the side, or in addition to income from a job that you could step into or increase your activity in. Should you lose a job. To make sure that you're protected, to make sure that you can take care of what you need to, and unemployment coverage, I mean, that can just help protect you and fill in the gaps when you lose a job. To make sure that you can keep your head above water, that your financial foundation stays intact and you can keep moving forward. Another thing that can threaten your foundation is illness, injury or disability. 1 in 4 workers will face a disability before retirement, and most people aren't financially prepared for three plus months without income. Again, that's going to lean back to the importance of an emergency fund. Knowing that you can fill in the gaps for the unexpected things that can happen. An unexpected death. Losing a breadwinner can devastate a family financially and emotionally. Now look. Losing a loved one can be. I mean, it can absolutely rock your world emotionally. But I want you to just imagine for a second if you lost a loved one and you were carrying that emotional burden and on top of it, carrying a financial burden as well. As a matter of fact, if you are carrying a really heavy financial burden. Through a situation like that, it might be hard for you to even be able to experience the emotional side of it, which means the impact can stay so fresh and so big for such an extended extended period of time. None of us want to lose a loved one, but it's going to happen. We all have an expiration date. We all have a timeframe in which we're going to graduate this life. Why not make sure that our families are protected and we have things in place, in place to make those situations a little less heavy, a little less difficult to navigate. And life insurance replaces income. It can pay off debt, and it can fund legacy goals that you and your family have or that you have for your family. The next threat is legal risks or lawsuits. A single accident or legal situation can completely wipe out a person's savings. There are things like liability insurance and LLCs that can help mitigate the risk. So if you're a business owner, if you're a homeowner making sure that you have the right protections in place, should something like that can or should something like that happen can make an incredible amount of difference. It's really important to know, okay, in this situation, what is my potential liability and how can I make sure I'm protected against that. And then there's market volatility or economic downturn. We've talked a little bit about this. Having all of your money in the market can mean big losses if timing is bad. And I want you to think about for those of you who are well aware, with or experience the impact of 2008, the market dropped between 2008 and 2009 40% Almost people lost almost half of their lifetime savings, and it changed everything in their financial plans and their futures. It's important to have a balanced portfolio that's built on a strong financial foundation, making sure that you're leveling out that risk with protection oriented products as well. And then the last thing on this list, at least, I think there's a ton more we could go into. But the last one we're going to cover today that is a threat to your financial foundation is family caregiving. If you're in the sandwich generation, and that means you've got kids that at some level you're still supporting and you have elderly loved ones you're also supporting, or that you could end up supporting in the future. You might step in and become responsible for aging parents while you're still managing the responsible responsibilities of parenting your own children. It's important to plan ahead with long term care insurance, proper savings and. Oh my gosh, y'all open family conversations. I can tell you next week's episode. We're going to be diving a little deeper into what kind of conversations you should be having in the different areas of your financial plan, who you should be having and with, when you should be having them, and why they're so important. So I'm not going to dive too deep into that or much deeper at all into that, but having conversations that are open and honest when it comes to potential caregiving situations are absolutely vital. I want you guys to take a minute right now, pause this episode and write down one financial threat out of that list of six that you feel like you might not be properly protected against. And then I want you guys to reach out to me on social media. You can find me on Facebook and Instagram. Under. Natalie McPhee came on TikTok as the financial caretaker. I'm on LinkedIn as Natalie. Natalie McPhee came as well. DM me the word Foundation and I'll send you some information on how you can better protect or prepare for the financial threat that you mentioned is a concern of yours. We can even set up time to talk a little bit about it where I can make some suggestions for you. But it's so important to recognize the areas where you might have holes in your plan and talk to somebody ASAP about plugging those holes and creating some additional protection for yourself and your family. All right, so at this point, how do we protect our financial foundation? What are some practical strategies that we can use? Well, we can create a protective shield around our money. Um, in a lot of different ways. Number one, let's talk about protecting your income by having disability insurance. You you have the ability to replace a portion of your income. If you can't work for a period of time or permanently. There are disability insurance plans available, sometimes through your employers. Um, definitely individually and I one of the things I want to take a second here to point out is a lot of us throughout our careers, the job you're at today, you likely have access to a lot of different kinds of benefits life insurance, health insurance, maybe disability insurance, accident insurance, things like that. But let me remind you, those are in place. As long as you have that job, if the job goes away, your access to those plans or your policies may be even go away as well. So I'm going to recommend having those things set up individually for yourself. Now you can utilize the programs that your employer to add to what you already have on a personal level. But I would recommend setting up those kind of protections individually so that they are with you whenever you might need them. And it's regardless of a job that you have. Because a lot of times if you have it through your employer, you may even forget when you change jobs that you need to replace that or see if it's available through your new employer. So you could end up in a difficult situation without even realizing it. Disability insurance is also critical for business owners and self-employed people, because you don't have that option of getting that through an employer. So my recommendation is for these kind of protections that you put them in place for yourself, whether you're an employee, a business owner, or you're self-employed. Just to create that foundation, know they're in place and have all of your information organized. Should you run into a difficult situation. And then also make sure you diversify your income. Build a second income stream so one disruption doesn't derail everything. And if you can find a way to create a passive income stream so that if you can't work, it continues making money for you, that's a complete game changer. The second item in Practical strategies we can utilize is life insurance. This is the ultimate financial love letter and I love how that is worded. It is a love letter to yourself and your family because life insurance does not just protect you if you die too soon anymore. It also protects you if you live too long. Life insurance policies have living benefits. Have long term care that can address a lot of situations that can come up. And then of course, if you do pass away, it's the ultimate gift to your family. To be able to maintain the life that they're accustomed to. So there's a few different types of life insurance. Term insurance. It's affordable and it's it's great for income replacement, but it is only in place for the term of the policy you select. So a ten year, maybe 15 year, 20 year, 30 year, depending on the company that you're working with and what they have available. So that's where it's really important to have a complete financial conversation with somebody like me. If you don't have somebody reach out to me, I'd love to have that conversation with you. It is a complimentary conversation, um, and a chance to just identify what you have and what the what the needs might be. A lot of times we may not know how to calculate what our needs are, but the questions are, are you married? Do you have kids? Do you own a home? Those kind of situations are going to impact the type and amount of coverage you have when it comes to life insurance, and we can dig into the reasons why. And then there's permanent insurance whole life or in index universal life or cash value life insurance policy that lasts a lifetime but can also build cash value. So I mentioned that briefly earlier when talking about people utilizing that to build part of their emergency fund. You can build it. You can use it to build additional savings as a part of your overall financial portfolio. So not just for an emergency fund, but for even more. Why does life insurance matter? Well, it protects your family. It can pay off debt. It can replace your income. And as I already mentioned, it can be used while you're still living. A lot of misconceptions around life insurance are. I'm too young. I don't need it. Nope. Let's be honest. You may not need it today, but you don't know what's going to happen tomorrow. And the younger and healthier you are, the less expensive that life insurance is. So when you think about getting a permanent policy, it's never going to be cheaper in the future than it is today, whatever age you are. And I'm going to touch really briefly on the importance of life insurance for minors. I don't know about you guys, but if you watch the news at all, you see accidents happening all the time. My son lost a very, very dear friend of his between his junior and senior year in high school. This young man had just graduated high school and he was in a single car rollover accident and lost his life. I have friends who have kids, have kids that have gotten in some pretty serious car accident as teenagers, or have faced a significant medical diagnosis that they never knew was coming. It's so important that for juveniles, for minors, for your children, you have life insurance policies in place. Again, the sooner you get it, the cheaper it is. So think about if you got a permanent policy on a brand new baby, like you can get them covered at 14 days old as soon as you have their Social security number, but you put a policy in for a very minimal amount of money that can truly protect their life forever. And it can also give them a great foundation to building significant wealth for a very, very small investment today. So again, life insurance is cheaper the younger and healthier you are. So there's no better day to start than today. The third item is health insurance and medical protection. Even a minor ER visit can be thousands of dollars depending on what's going on, what kind of tests they need to run. Emergency rooms are equipped with so much equipment, but a lot of medical plans only cover a certain portion of an emergency visit, depending on the type of policy you have. So a lot of people will use Arma or HSA plans to help supplement their health insurance, and to help them as a way to save for potential out-of-pocket medical expenses. And so I would recommend looking to see if one of those plans makes sense for you if you have the ability to access one. A lot of times employers will have those in place, but you can get them independently as well. And then if your plans have high deductibles, again, those HSA or HMO accounts can really help by accumulating cash over time and having it available to pay those deductibles in addition to the out-of-pocket expenses after your insurance kicks in or having supplemental plans. Secondary coverages that can come in and pay additional. When those situations arrives. All right. Number four we're going to revisit legal documents. Again I already talked about how a will is great, but a trust is, in my opinion, the absolute best thing that you could have. And the only thing that can fully and completely protect your legacy. So a will is going to distribute your assets according to your wishes. A trust is going to distribute your assets according to your wishes and avoid probate, which can be extremely costly, can take a lot of time and add additional anguish to your loved ones. Now, when you're doing a living trust, it includes the powers of attorney allowing someone to manage your finances. If you can't, It also includes an advance directive which guides health care decisions if you're incapacitated. That's what I referenced earlier as the medical power of attorney. The technical name for it is an advance directive, but it says if I am incapacitated, here are the situations I do and do not want life saving measures to be taken. Again, really important conversations to have with your loved ones, and especially with those people that you're acting, asking to step into that role and make those decisions for you or not make them for you. Because if you have the advance directive that makes the decision, but they're implementing that on your behalf, it can save your loved ones so much mental and emotional anguish to know what you would have wanted, without a doubt, then to hope they're making the right decision because you never talked about it and you didn't have anything in place. So these different things are often under $500 depending on what you're putting in place if you do them individually. But they can protect half a million plus, like they can protect your entire financial foundation fortress, everything you've built if they're set up right. But a trust will include all of those things. And I can tell you, depending on who you go through, a trust can cost up to 4 or $5000. Um, if you are interested in trust, please reach out to me. I have, uh, one of the owners of Universal Wealth, the company that my licenses are planted with that I do business through. Um, one of the owners is a top estate planning attorney. He's been on my podcast before, Andre Pennington, and we have a program with them that can get you a living trust at an incredible rate. So if you're interested in getting connected for a consultation call, which costs you nothing and obligates you to nothing. Please reach out through the link in the show, and I can get you directed to that team to see what makes sense for you in that category. All right. The next one liability protection having umbrella insurance. This is extra coverage to protect you in case of a lawsuit or an accident. It's so important. I have a really great networking partner that does PNC insurance. And he talks all the time about how people do not have umbrella insurance in place and do not even know what it is, but it can be a game changer when it comes to protecting you. Should an accident happen on your property, or you cause an accident in your car, or a lawsuit arises in a situation against you, and then LLCs making sure that you separate your business liability from your personal assets. So that LLC gives you that protection, that if somebody sues you, they can't come after your personal assets. They can only come after the business assets. And so it can't completely wipe you out. There's a lot of additional information in that that I don't have time to go into today, but definitely an area to focus on to ask about. Get with your CPA, get with your estate planning attorney. Get with your financial professional. And if you don't have one again, I am always here as a resource at no cost to you to get some information and direction. And then finally actually utilizing financial coaching or financial professionals guidance, somebody who can help you avoid the blind spots and build smarter. Look, I come on here and say all the time, y'all can reach out to me. This isn't about me selling you something. It's about me giving you the opportunity to partner with myself. Somebody who is educated in these areas. Somebody whose livelihood is helping people make sure they're properly protected. Somebody who gets it. I'm not going to propose a product to you that you don't need, or that doesn't fit your financial goals. And as a matter of fact, I'm not even going to propose a product to you until I give you some education. And we go through a complete financial analysis that helps identify what your needs are. And more importantly, that I understand what your specific goals are and your priorities are. And then we build from there. So if you need a resource, I'm here for you. And it doesn't cost you anything to sit down with me. You don't have to have a minimum amount to invest. My number one goal is getting education out there and information out there that can help people build a proper financial foundation and change their family's lives forever. So if that's a goal of yours, let's have a conversation. It's why I started this podcast last year. I wanted to be able to help more people create the financial future that they are dreaming of. All right. So real quick, before we wind this down, I want to talk about busting some of the myths that are out there. Again, I already mentioned I'm young, I'm healthy, I don't need insurance. That's exactly when you want to lock in coverage because you don't have a crystal ball. You don't know what your expiration date is. You don't know when your graduate life. You don't know if you're going to be in an accident. You can't control so many things about this life in this world. So when you're young is when you when you want to lock in that coverage rates are low and you're insurable. Because you're likely the healthiest you're ever going to be. The younger you are, a lot of people think insurance is a scam. It's not an investment. It's a risk transfer. If you don't need it, great. But if you do, it can save your financial life. And that's why I work with tools that give you multiple ways to use the benefit. Look, we're all going to die. So if you have life insurance, eventually it's going to pay out if it's a permanent policy, okay. We're all going to die. And if you don't think so, well let me know. Let me know the information you have. Because. I don't have any information to the contrary of that. We are all going to graduate this life at some point, and we don't know when it is. So what you're doing is you're transferring that risk onto a life insurance policy. But as I already mentioned, life insurance can offer living benefits and long term care so that if you get if you get sick later in life, if you receive an unexpected diagnosis or a critical injury or something like that throughout life, you can tap into your death benefits while you're still living. And some policies allow you to save and invest for the future within those plans. So it can fill multiple holes that might exist in your overall financial plan. All right. Number three myth. I'll just invest more instead. Look, smart investing includes protecting your downside. It's great if you're investing in saving money, but if you're not going to have protection. In addition to that, you might have to use your savings for retirement to cover a medical emergency To cover if you're no longer able to work. Why not have both? Why not have the ability to retire on your terms in the future, and know that you have protection that's going to take care of all those unexpected things, like, would you drive without a seatbelt just because your car has airbags? I mean, I don't know, maybe there's some of you out there who would I wouldn't recommend it. But I say all the time, and I think I probably even mentioned this last week's episode. We ensure our cell phones, we have to carry life insurance or, I'm sorry, health insurance. We have to carry homeowner's insurance. We carry all these other types of insurance because it's required or on our cell phones. We're like, man, that sucker cost me 1500 bucks. I'm putting that $7 a month insurance on it just in case. What about your life? People? What about your life? The most important thing you have. And for some reason. You have to be convinced. It makes sense to insure it. And then the last one is. It's too late for me. Y'all, it's never too late to start. Protect what you have now and build from there. Now, look, your options for that protection may be different the older you get, but there are still options out there, so don't assume that they don't exist. Sit down with somebody who can show you what's available, how it works, and how it can address a problem or a concern that you have a gap that you have in your protection plan. As I wind this episode down, I just want to remind you guys you've worked hard for what you've built. Don't let one unexpected event undo all of that hard work. Protecting your financial foundation isn't fear based. It's freedom based. And finally, the most powerful wealth builders protect what they have before they build more. One of the other things I share with every potential client the first time we sit down is. That I do things differently. Universal wealth does things differently. We protect first and then we invest the rest. That's what that last statement was talking about. The most powerful wealth builders protect what they have before they build more. I challenge you guys to look at what kinds of protection you already have in place, and identify the areas or opportunities you have to put some additional things in place and make sure that that foundation is as strong as it could be. You wouldn't build a house without a strong foundation. So why would you try to build a financial fortress with that one? I want to thank you guys for tuning in again this week. I want to remind you that my intent is to always provide information that you might not be receiving somewhere else, and that might have an impact on your financial future. You've been listening to Nickels and Dimes with Natalie Kime, and I hope today I've provided that kind of information for you to make better decisions, to ask better questions, and more importantly, to create true financial freedom for yourself and your family. So I appreciate you being here with me each and every week. I look forward to having you listen again next week. And until then, take care and stay safe.