The other day I was talking to one of my wife’s co-workers. He knows I do financial coaching and he was pretty proud of himself for the way he has handled his money thus far. He was wondering what I could do for someone in his financial position.
For someone who is fairly young, he’s made some pretty good financial decisions. He uses cash not credit. He’s got a good job that pays well. He also has several rental properties that he owns and has income from.
I began to quiz him a little. He’s got a family. What kind of life insurance does he have to take care of them if something were to happen to him? “Well I hope my wife would know to sell some of the rental property I own.” What are you doing for your retirement? “Well I’ve got the pension from work, and I’ve got my rental properties.” What about saving for your children’s college education? “I’ve got my rental properties to take care of that.” Are you seeing a pattern here?
Like I said, he’s made some great financial decisions in his life thus far. He’s in a very enviable position for someone his age. He can have a bright future. But he’s got all his eggs in one basket. What if there is a glut in the rental market that makes it hard to rent out during his retirement? Or if there’s a poor real estate market like there is now that makes it difficult to sell his properties when he needs the cash? And I’m especially concerned about his plan for life insurance. Expecting his family to have to deal with the sale of property in the event of his untimely death is not being very respectful of them. Dealing with the loss of a loved one is difficult enough in and of itself without having to worry about other issues like that.
He’s made some great decisions for his finances, but he needs some diversification. Spread things around a little. He also lacks a solid plan. You can make a bunch of great decisions in your life, but if you don’t have a goal, a plan, then they will probably amount to nothing in the end. Make sure you put together a life plan, not just for yourself, but for the benefit of your loved ones as well.