Do You Have the Big 3?

In this week’s edition of Monday Morning Quarter-Buck, Financial Planner and CFP® Scott DuMond writes about the potential financial blind spots that we sometimes have in our lives. Do you have the Big 3 covered in your life?

By: Scott DuMond, CFP®

When driving a car, we know to check our blind spot before we switch lanes, or we could end up in an accident that we didn’t even see coming. Experience has taught us drivers that in addition to checking our mirrors we need to take an additional action, turning our heads because there could be a car hidden in the next lane that we cannot see by just using our mirrors.

Blind spots in financial planning are similar. A potential major hurt to us or our family if we do not carefully prepare and take the necessary actions in advance. While there are many potential blind spots that effect people, three of the biggest I call “The Big 3.”

What are the Big 3?

  1. An emergency fund in place?

  2. Life insurance - if you need it?

  3. A Will, Power of Attorney and Health Care Proxy?

A description of the Big 3

  1. An emergency fund. All of us should have an account that is separate from our day to day checking and savings. The purpose of this account is to provide the funds necessary to help us through an emergency without taking on debt or selling an asset or investment.

  2.  While not everyone needs to have life insurance, everyone should at least ask the question, ‘Do I need it?’ If the answer is yes, then choosing the right type and amount is an important next step.

  3.  Like life insurance, not everyone needs a Will, POA and health care proxy. However, most of us do.

    •  Wills - We have accumulated assets and want to be sure they are received by specific people in our life at our passing. (Don’t forget to also check your Beneficiary Designations for you 401ks, IRAs and Life insurance.)

    • A Power of Attorney also can protect our assets and financial well-being by empowering someone to pay our bills and take care of business if we are incapacitated or out of the country.

    • A Healthcare Proxy empowers a specific person to inform medical personal of our wishes if we are unable to do so ourselves.

Each of the Big 3 has a few things in common.

  1. It is an area of our lives we do not want to think about such as what happens after I pass or become incapacitated.

  2. Over the twenty plus years I have been a financial planner I can count on one hand the number of clients that have had all of these in place before we met.

  3. These are actions that you cannot take care of after the event they are affecting takes place.

So, I ask each of you this question in closing: Do you have the Big 3? If not, please do not delay; take these steps. If you need help in any part of the decision making, please reach out to us.