My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Spring 2025

This month we are going to take a break from our usual technical topics, and discuss a more fundamental issue.  What is the point of all this planning and analysis?  To amass the largest investment portfolio possible?  NO.  It is to reach your highest goals and aspirations.  The problem is that many people don’t have well-defined objectives, and consequently spend their lives vaguely unhappy without knowing why. What is the point of saving and investing if it isn’t FOR anything?

We don’t do extensive “life planning,” but some of the following questions can be very helpful in revealing your deeply held values.

The classic Kinder questions:

1. Imagine you are financially secure, that you have enough money to take care of your needs, now and in the future. How would you live your life?
2. Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining?
3. Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. What did you miss? Who did you not get to be? What did you not get to do?

Other questions:

1. If you weren’t doing what you are today, and money were no object, what would you be doing (and why)?
2. What expenditures bring you happiness?
3. What’s your definition of “enough”?
4. What do you want your legacy to be?
5. How do you define the term “wealthy”?
6. If you’re wildly financially successful, how much do you want to give to or leave to your kids?
7. Why is your money invested the way it is?

You can have the best portfolio and financial plan possible and still not be making progress toward your deepest desires.  That is what your investments and your financial plan should be about – assisting you in reaching your most important goals.

Steven Covey, in his excellent book Seven Habits for Highly Effective People, uses a simple graphic to categorize activities.  All activities can be categorized as important or unimportant, and urgent or not urgent.

Dwight D. Eisenhower (quoting J. Roscoe Miller) once said in a speech, “The urgent are not important, and the important are never urgent.” Thus, this paradigm has come to be known as the “Eisenhower Matrix.”

Important is self-explanatory, but urgent may not be.  Things that are urgent have some immediacy to them.  For example, going to see a relative who has just been rushed to the hospital or responding to a new social media post.  They both have a quality of immediacy, of something to be done “now”, but the difference obviously is that the first is important while the second is not.  If an activity can be delayed without immediate consequence, it is not urgent.  For example, most people would say getting their finances in order is important, yet they never get around to doing it.  It can be delayed and procrastinated indefinitely – there is no sense of urgency that leads to doing it NOW.

Every activity can be placed in one of the four quadrants as follows:

	Urgent	Not Urgent
Important	I	II
Not Important	III	IV

Mr. Covey makes the point that while everyone does quadrant I activities first (both Important and Urgent), effective (i.e. successful) people do quadrant II activities next (Important yet Not Urgent) while ineffective people spend their time on quadrant III (Not Important yet Urgent).  Everyone generally avoids quadrant IV successfully (Not Urgent and Not Important).

Remember, the key to success is to do more quadrant II activities, by using time and energy freed up by dispensing with quadrant III activities.  Here are some examples of some financial planning activities and where people would typically place them:

Quadrant I (Important and Urgent)

• Preparing tax return before April 15^th deadline
• Going to work every day
• Contributing to IRA(s) before April 15^th
• Signing up for employee benefits before the end of the enrollment period

Quadrant II (Important and Not Urgent)

• Buying insurance (life, disability, etc.)
• Increasing 401k contributions
• Doing estate planning (wills, durable powers of attorney, etc.)
• Implementing a financial plan/investment strategy
• Sending referrals to your friendly neighborhood financial planner (sorry, couldn’t resist)

Quadrant III (Not Important and Urgent)

• Checking what the market is doing today
• Watching talking heads on CNBC
• Attempting to identify (in the words of popular investment blogs, etc.) “Top 10 Stocks to Buy NOW!”

My latest quarterly ramblings to my Financial Professionals list are out: Financial Professionals Winter 2025

We do not sell property and casualty insurance (auto, homeowners, etc.) but we review it because inadequate insurance could thwart the best of investment strategies.  This month I will focus on an oft-neglected corner of financial planning and give you a few tips on that most boring of topics, your property and casualty insurance.  The following are what I consider the three most common mistakes individuals make in this area:

Having deductibles that are too low.  Many people are carrying deductibles on their vehicles and homes that are far too low.  Many people carry $250 or $500 deductibles because that is the level they selected years or decades ago, and they have never changed the amounts.  Individuals for whom a few hundred dollars of increased expenses in an accident would be a problem have far more serious and fundamental financial issues than determining their optimal deductible.  For the rest of us, there are three reasons to consider raising deductibles:

1)  Small insurance claims can lead to higher rates or non-renewal of coverage.  This is becoming increasingly true for homeowners coverage.

2)  Premium savings can be substantial.  In many cases you can “save” the amount of the increased deductible in just a few lower premiums.  Remember there is no such thing as a free lunch.  Insurance companies price their policies to cover their costs including overhead to process claims.  If you raise your deductible, you save them processing costs on small claims and signal through your willingness to assume some of the risk that you may be a less costly customer overall.

3)  Hassles are reduced.  In the case of a small problem, you can just handle it (or not) at your discretion and leisure, without having to deal with filing a claim.

Failing to carry umbrella liability coverage.  Many people with substantial assets to protect fail to secure a personal liability policy.  There are three reasons to consider one:

1)  A personal umbrella policy is generally very inexpensive (generally only a few hundred dollars per year per million dollars of coverage).

2)  Insurance companies won’t write an umbrella policy if the underlying insurance you carry is inadequate.  By getting an umbrella policy you are “forced” to increase your underlying coverage to acceptable levels if they aren’t already.

3)  Given the low costs, in today’s litigious society do you really want to be without it?

(See Umbrella Coverage for more on how to select the appropriate amount.)

Carrying medical payment coverage.  This is not coverage for other people – they are covered by the liability section of your policy when you are at fault.  Medical payment coverage is for you or your family.  There are two reasons to drop this coverage:

1)  Obviously, your premium will be lower without it.

2)  If you have adequate health insurance coverage, it is redundant.  If you do not have health insurance, you will need this coverage, but you have a larger problem – you need health insurance!

By reviewing your coverage with your agent and avoiding these three common mistakes, you may well be able to both decrease your risks and save money simultaneously.