Create a Financial Protection Plan
I told you I would hit you guys with this, remember when I did the file box? The lesson on the file box, Finish Rich file folder system? Remember that? So I said there would be a file and a lot of you would be empty, it was called your will. We're going to go through the things you need to protect you, your family. Number one, you need a money airbag. That's that emergency account that I showed you in the first lesson. You need to have a will or living trust. You need to make sure you're properly insured. So, let's go to build your emergency account. You need to have three to 24 months of expenses set aside for emergency purposes. It should be safe, not attached to checking, not attached to an ATM, not attached to a credit card. Where do you find these accounts? Go to bankrate.com, there's an entire list of all the highest paying money market accounts. Look at them. So, on average, banks are paying right now, anyone know what they are paying?
Well, zero percent, but --
On average, ...
they're paying pretty much close to zero. Like, zero or point one zero, one tenth of one percent. It's sort of sad because when I used to write, in the beginning when I wrote books, the rates were seven percent. I know, wow, right? I remember when my Dad was teaching those classes and money markets were 13%. Interest rates were a lot higher then, too, so it was all ... Here's another website. I think we have another website here, where do you put it? So, these are the places to put it: money market accounts, CDs, US Savings Bonds, treasurydirect, savingsbonds.gov, these are all great places to put emergency money. The whole key to emergency money, again, it's for emergency purposes. You're not going to touch it, you're not going to use it, you're going to leave it there for emergency purposes. On treasurydirect and savingsbonds.gov, actually, believe it or not, the rates can be somewhat rather decent-like. Often they are like higher, much higher, than what you would get at a bank. You can invest with as little as 50 dollars, you can invest automatically. So, go check those websites out. I want to give you a new website called magnify your money, magnifymoney.com. This is a new player. I was very, very impressed with this website. It's, you know like with bank cards you get all the articles. This is a new website specifically focused on comparing rates, so you can go onto a website like magnify your money, you can look at different rates. How would I select a money market account? It's not necessary that you have to have, first of all, the highest rates are one percent to one point one zero right now. The difference between a bank account and the highest paying money market account is 100 times difference. It's one percent. But, you can go in here and you can run the numbers and they'll quickly show you, if I have this much money and I'm getting this, and I switch it over here, how much more is it a year? You can see the difference. If you have a bunch of money sitting in an emergency account it's a pretty big difference. Don't just choose some random high-paying account, though. There's a lot of these accounts that have got a one percent rate, and you're going to look at it, and you're gonna recognize the financial service company. Like Goldman Sachs, for example, has, believe it or not, Goldman Sachs now has an online savings account. They just got into the retail business. How many of you have heard of Goldman Sachs? Can you believe they have an online savings account? It's paying over one percent. If I'm going to open an online savings account, I'm going to give my money to Goldman Sachs as an example over some little rinky dink firm I've never heard of. When you look at the list, if you recognize the firm and it's a big bank or a big online service company, I'm going to use use that over somebody I've never heard of in God knows where. And then I want to check to see if it's insured. Okay, so then you need a will. You need a will, you need to have a health care directive. This is what goes into your wills. Financial power of attorney, executor documents, and final arrangements. Nobody likes to talk about wills. Everybody needs one. You guys all need wills, you just do, especially if you're married, especially if you have kids. People always say, well, if I died. It's not really kind of if, I mean, I'm a positive guy here, 75 percent, you know they say the glass is 75 percent full here. But it's not if, right, it's just when. So, get a will done, keep it updated.
Isn't a trust better because it's a tax benefit?
Trusts have nothing to do with taxes. Trusts have to do with privacy, and it depends, so I actually say have a will or living trust. See up here, have a will or living trust. It depends on the state. Because states have different rules. In general, do a living trust, but I live in New York City, and attorneys don't do living trusts. I came from California, I had a living trust set up. The living trust is what is called an irrevocable living trust, by the way. Really important thing when you do an irrevocable living trust. If you don't place your documents, your investment accounts, in the irrevocable living trust, then your investments are actually not in the irrevocable living trust. People go and they spend a year getting an irrevocable living trust created, then they never bring the paperwork into the financial service company, and then none of the assets actually go in the irrevocable living trust. The whole point of an irrevocable living trust is that you actually avoid probate. You don't end up having to go through the court system to deal with your state issues. Which is very valuable, you can save a lot of money, and also, it's not public. Proper beneficiaries, obviously that's key. Family knows the location. Consider hiring an attorney to develop this. Let me tell you what people do in the real world. They go and they get a will done, they're super proud of themselves, then they hide their wills. (audience laughing) Then they die and nobody knows where the will is. (audience laughing) Now, if you're really sophisticated, you go and get a will, where do you think you hide it?
Lawyer's office is actually a good place because the lawyer would know about it. There's nothing wrong, like, I've got my wills at my attorney's office. I also have one in the house. But people take their wills, believe it or not, especially older people, not the millennials but the older people, are taking their wills and they put them in a safe deposit box and they got a key, and then they hide the key. (audience laughing) And now that thing is really hidden. Alright, so you gotta let somebody that you trust know where those documents are, and it's really like serious. Here's a self do it process. If you're not going to go meet with an attorney and you want to go do a will easily, these guys probably make the best, simplest, easiest tool I know to do your will at home. It's nolo.com, this is Quicken WillMaker. They update it every year. This is better than not doing it. All things being equal, I'd rather have you go to an attorney. This is better than not doing it. The next thing we talk about is life insurance. So, do you need life insurance, yes or no?
Depends. If you are single, and you don't have any dependents, then unless you're dying to leave money to somebody, ha, get it, dying to leave money to somebody? (audience laughing) You don't need insurance. I'm not a big believer that insurance typically is an investment. I think that 90 percent of the time, life insurance is a protection plan. You are buying life insurance to protect your family in case you die early. The beauty is that if you have dependents and you have debts and you want a protection plan for your family, you can go out and buy term level life insurance. And you can buy it cheap. It's never been less expensive to buy term life insurance. What term life insurance is, is you buy a policy, it goes out 10 years, or 20 years, or 30 years. Typically, you want 20 years or more, you're usually buying it when you've had kids, and you want to make sure if something happens to you and you die early that your children, that your wife or your husband are protected to take care of the kids while you've passed away. You can buy a term policy now, like, up to a million dollars, for like a hundred bucks a month depending on your age. In some cases, it's even less expensive than that. Here are some websites you can go to to look for insurance, insure quote, AccuQuote, SelectQuote. There are so many of these websites. There are so many places where you can buy term insurance inexpensively online. This is gonna be, this is like a no brainer. I want to go through the cost of insurance here. Life insurance has never been cheaper. A 35 year old healthy man can purchase a half a million dollars on a 20 year policy for 34 bucks a month. So like, latte factor, that's like every two days don't have coffee, or every three days. It's ten, no it's not even ten, it's like seven cups of coffee. (audience laughing) Right, yeah, no, it's like six cups of coffee. It's five coffees to protect your family. I talked about this in Smart Couples Finish Rich, this is actually an old email and picture, but this came from Stephanie Russell. She sent this to me, she read Smart Couples Finish Rich, her husband unfortunately passed away young. Those are her two kids, and she wrote to me and she said the best piece of advice we were able to follow was to purchase life insurance. It was a small step that allowed me peace after my husband's passing. My boys and I will be able to live comfortably after his passing. It's all because we followed your sound, smart advice. Thank you, David, your advice saved us. She's just somebody who read one of my books. I hate to hear stories of people losing their husband at a young age, but the average age of widowhood in this country is 56 or 57. I know. (audience laughing) So, widowhood, cause men are the ones that pass away.
So, yeah, it matters.