Do You Insure the Goose that Lays Golden Eggs; or, Do You Insure the Eggs?

If you owned a goose that laid golden eggs and you could only buy one insurance policy, would you insure the goose or the eggs?  Most people are likely to answer this question by stating that (obviously) they would insure the goose.  So, let’s consider a variation on this question.

Have you thought lately about your most prized possessions; your most valuable assets?  Do you know what they are?  Most people are likely to answer this question by saying “yes” and then listing items such as houses, cars, boats, jewelry.  These things are valuable and that’s why people buy homeowners insurance, car insurance, and boat insurance.  However, let’s consider another asset that is, without a doubt, far more valuable than any of those things mentioned above … your ability to get out of bed each day and go to work and earn a living.

If you get sick or are hurt and incapable of working, how do you protect the paycheck upon which you and your family depend for food, shelter, water, electricity, and clothing?  Prudence dictates that we cannot rely upon the good will and charity of others to care for our loved ones.  That responsibility is ours and ours alone.  Surely there must be a way to protect ourselves and our families from this potential calamity!  Fortunately, there is!  It’s called Disability Income Insurance (DI for short).

DI pays a percentage of your income while you are unable to work due to accident, injury, or illness.  Generally speaking, that percentage is 60% to 70%.  People often ask why it doesn’t replace 100%.  After all, most people today rely on all 100% of their income to keep the bills paid and food on the table.  The reason is really very simple.  Consider a person we’ll call Mark.

Mark is one of those fortunate people who really enjoys his job.  He wakes up each morning with a smile on his face and looks forward to the interaction with others that his job provides.  That’s not to say that Mark doesn’t have hobbies and interests that he’d like to pursue.  Oh no!  There are days he’d love to go fishing if only he didn’t have to go to work.

Now, let’s suppose that Mark gets hurt one day.  It’s bad enough that he can’t do his job; but, not so bad that he can’t go fishing.  If Mark is collecting 100% of his income while he goes fishing, he has no real incentive to get better quickly.  But, if he’s only receiving 70% of his normal pay, he has a great incentive to recover as quickly as possible.

Disability insurance can be a very real financial life saver and should be a part of everyone’s financial protection portfolio.  In the days to come, we’ll take a look at key components that should be considered when purchasing Disability Income Insurance.

Help! I’m Retired and Can’t Afford to Run Out of Money!

My friend Jack’s widow called me recently and told me that her brother had died.  She still hasn’t finished settling her husband’s estate and now she’s responsible for settling her brother’s estate, too.  While going through her brother’s papers, she found that she would be receiving a significant sum of money from the sale of his property.

“Help,” she said.  I need to create an income that I can’t outlive.  This is all the money I’ve ever have.  I can’t take a chance that it will be gone before I am.”

I was happy to tell her that there is a way to create an income that will last as long as she does.  It is called an annuity.

An annuity is a contract issued by an insurance company that can turn a lump sum of money into a monthly income.  The person receiving the income is called the annuitant.  The annuitant can receive this income for as long as he or she lives; or, by using an option known as “life income with period certain”, can receive an income for a specific number of years or for life; whichever is longer.  Consider this example:

Mark and Martina recently retired after selling the business that they had owned for 30 years.  They planned to travel and see all of the sites that they had dreamed of visiting over the years.  Sadly, Mark suffered a massive heart attack and died.

Quite naturally, Martina feared that she might outlive the money that they had received from the sale of their business.  To ensure that this could not happen, she purchased an annuity from the Shifting Sands of Daytona Insurance Company.  However, she also wanted to make certain that, if she died in the near future, the money that was left from the sale of the business would go to her daughter.

Her insurance agent recommended that she create a lifetime income guaranteed for a minimum of 10 years.  The annuity would pay her a monthly income of $1,500.  If she died at the end of the second year of payments, the contract would pay her daughter the remaining eight years (96 months) of payments; $1,500 per month.  On the other hand, if Martina lives another 20 years, the annuity will pay her $1,500 per month for as long as she lives.  Martina cannot outlive the monthly income; but, the income could outlive her for the benefit of her daughter.

Clearly, annuities are not the perfect answer for every situation.  But, if Jack’s widow is concerned that she might outlive the money she receives from her brother’s estate, an annuity might be the answer to her concerns.


I met with “Susan” this week and asked if we could review the record she was keeping of what she spent her money on; her expense log.  She pulled a notebook out of her purse with some apprehension and quietly told me that it was “pretty embarrassing.”

Susan went on to tell me that she had been afraid to keep this record; that she feared it would make her look like a bad person because of what it revealed about her decision making.

She continued, “This morning, I reviewed my notes and they confirmed my worst fears.  I made a lot of really bad decisions.”

This is a very common reaction when people first begin keeping records of their spending and taking responsibility for how they manage their money.  They feel like the record they keep is full of bad news.  It was fun to tell her that the record is actually full of GOOD NEWS.

“Susan, your expense log may feel like bad news, but it’s really full of good news; and, here it is.

•    “First, you took a really big step in choosing to keep this record.  It took real courage and commitment.  It’s very important that you give yourself credit for taking this big step.

•    “Second, each of us has a personal board of directors in our minds.  Think of your board as those little voices that are always whispering “good choice”, “smart move”, or “ooo, you could have done better”.  This board is always looking at what we’ve done in the past and what we can do in the future with the goal of helping us do our best.  When you reviewed your expense log this morning, your personal board of directors expressed its disappointment in some of your spending choices.  As the CEO (Chief Excellence Officer) of yourself, you agreed with your board of directors and said, “yes, I could have done better”.  The GREAT NEWS is that you took a responsible step and decided that you wanted to make changes in your future spending decisions.

•    Third, the even GREATER NEWS is that your get to make your own plan for making those changes!”

By now, Susan was smiling as she realized that her fear of confronting what she thought was a real weakness had turned out to be a winning move as she took a big step toward financial independence.

Want the secret weapon that Susan used in this real life story?  Here’s what you can do …

1.    Identify three areas where you do not like the choices you have made about how you’ve spent your money.

2.    Set a goal of what you want future decisions to look like.

3.    Write down how you want to reach that goal.

4.    Promise yourself that you will make the changes that will enable you to reach this goal; and, continue to write down your expenses so that you can measure your progress.  (Bonus … if you just sighed and thought that this is too much work, take a second and write down just 1 thing you spent money on today.  Just one.  How long did that take?  Don’t let your emotions fool you into overestimating how much time this will actually take.)

5.    Set a date when you will review this record and decide if you have reached your goal.

Susan left our meeting with renewed confidence that she could control her money rather than have her money control her.

Ironically, the effectiveness of this process is not confined to personal finances.  It can be applied to all aspects of life.  Our internal board of directors is always conducting an on-going performance review … looking at our goals (or lack of goals), the plans we’ve created for reaching those goals, the progress we’ve made toward the attainment of the goals, and rendering a judgment every day; exceeds expectations, satisfactory, or unsatisfactory.  When we receive the board’s daily verdict, we choose how to respond.

•    We accept the accolades for a job well done and vow to keep up the good work;

•   We take credit for the accomplishments and responsibility for the shortcomings and make a plan for improving performance where it is needed; or,

Well, the third choice is giving up; but, that is not an acceptable choice.  The board of directors is not an external body that we can choose to ignore.  Rather, it is a living, breathing, part of who we are and it will always be whispering in our ear.  It cannot be disregarded.

Has your board of directors conducted today’s review? If it has, you know what you want to work on.  If not, there is still time to make today’s review a favorable one.

An Old Idea is New Again

Once upon a time, in a time and place long ago, Santa never bought presents for all of the good boys and girls with plastic money.  He only used green pieces of paper with pictures and numbers on them.  When he didn’t have enough green papers, Santa would tell the store what he wanted to buy and ask the store to hold it for him.  Each week, when he got paid, Santa would go to the store and give the manager some money as a partial payment on the toy that the store was holding.  When the toy was completely paid for, Santa would take it to the North Pole and have the elves wrap the present and put the name of the child for whom it was intended on the package.  The North Pole was a very happy place.

One day, an ogre gave Santa a piece of plastic and told him that he no longer had to take green paper to the store.  He could fill his sleigh with all the toys it could carry and not worry about the green papers.  In fact, he wouldn’t need green papers for a long time.  Over time, the North Pole became a very sad place.  There was never enough green paper and Santa received calls at all hours of the day and night from angry people demanding that he give them green papers immediately; lots of green papers that he didn’t have.

Finally, the head elf approached Santa with an idea … stop using the plastic … give the angry people green papers until all of the plastic bills were paid in full.  Then, ask the stores to hold the toys and allow him to bring a few pieces of green paper to the manager every week.  When the manager had received enough of the green papers, Santa could bring the toy back to the North Pole and have the elves wrap it in bright paper with shiny ribbons and bows.

On the day after Christmas, with no plastic swords hanging over his head threatening to make the coming year unpleasant, Santa could begin planning for the next year and getting presents ready for the good boys and girls.  The North Pole was once again a happy place and Santa could enjoy each day of the year as he looked forward to the next Christmas Eve.

How can I save money at the grocery store?

Recently, my good friend and client Carol asked me to review her family’s budget with her to determine if there were any opportunities she was missing for saving money and getting the most value for every dollar she spends.

While going through the budget, I noticed that she was spending far less at the grocery store than she had in the past.  I asked her how she had managed to cut her grocery bill while prices seem to keep going up nearly every day.  She shared her strategy with me … here it is.

  • Every Sunday, she sits down and plans her menu for each meal for the week.  Once the menu is set …
  • She creates a shopping list that lists out everything that is needed to put those meals on the table.  She then …
  • Takes the list to the pantry and crosses off those items that she already has.  With the list pared down to the items that she must buy, she …
  • Becomes the “Queen of the Coupon Clippers”.  Finally,
  • Carol goes to the store with her shopping list; and, if an item that looks good is not on the list, she does not buy it.  She sticks with her plan.

Sounds easy, doesn’t it?  Planning ahead helps avoid impulse buying.  It also ensures that all of the required ingredients are on hand when it’s time to make dinner.  Planning also helps save money!

It’s certainly well worth trying … it just might help you get more for every grocery dollar that you spend!