For an audio version of this post, please click on the speaker icon (top left).

 

 

When my daughter was 11 years old she came up to me and said, “Why do I have to make my bed?  I’m just going to mess it up when I sleep in it tonight.”

Ahhhh.    A chip off the old block.

I too have thought of that excuse as a child (and actually the thought has crossed my mind as an adult as well).

She has a point, doesn’t she?

I mean it takes a bit of effort to make your bed presentable before you trudge off to work, ahem, I mean school.

I don’t get to enjoy how the bed looks while I am not at home, which is the majority of the day, so why bother?

But why just stop there?

Along those same lines of rational thought, why do I need to vacuum the carpets.

The carpets are only going to get dirty, right?

Or how about bathing?

Why take the time to shower when I’m just going to get dirty anyway.

 

 

Before you start envisioning the Xrayvsn household slowly turning into a pig sty with incredibly odorous inhabitants just know that I quelled this mini rebellion immediately.

 

 

It is the “now mentality” that is the root cause of this.

With our fast-food, fast-paced society, we are being conditioned to expect benefits immediately.

If a particular result is beyond this time horizon (of immediate gratification), it becomes deprioritized or even neglected completely.

As technology advances, this issue is likely to become worse.

I remember when I had to peruse encyclopedias (large books that contained tons of useful information pre-Google for my younger readers) when doing term papers.

 

 

Now I see my daughter fly through the internet at breakneck speeds, cutting and pasting, finding appropriate images, to make a book report I could only dream about as a kid in a tenth of the time.

So getting back to the original query by my daughter, “Why do I need to make the bed?”

Well we do it not because it gives us immediate pleasure but rather delayed gratification.

I know when I go to sleep I love having the blankets nicely tucked in.

On the rare occasions where I have gone to bed when it hasn’t been made, I often find parts of me become uncovered during the night and it just doesn’t feel right.

 

 

Much like keeping one’s household in order, the same principles apply to keeping one’s financial house in order.

What we do in the early stages of our financial life cycle does not bring us immediate benefit.

This is a long term, often decades, play.

It is this clashing of the two basic underlying forces, the desire for immediate benefit versus the necessity for delayed gratification, that can often get people into trouble in terms of planning for retirement.

We need to make our financial bed now so that future self has a wonderful place to rest his or her head.

That means forgoing impulse item purchases and instead striving to maximize one’s savings rate (the single most important factor in building wealth).

This forms the frame of the bed which needs to withstand any activity that may  occur above it (I have a story, but I digress….).

It means we have to dig deep and create and maintain an asset allocation to match our risk profile.

This allocation can be thought of as the mattress.

When properly balanced, it provides a comfortable landing spot when the rest of the world is experiencing market turmoil.

 

 

It means that we have to make sure the sheets are tucked in financially.

This requires closely monitoring our portfolio so that assets remain in check within our desired allocation range using our investment policy statement as a guide.

And what about the comforter/duvet in this analogy?

On a chilly night there is nothing like a duvet protecting you from the external elements.

Our financial duvet in this scenario is our asset protection strategies.

It makes no sense to work and sacrifice so much to build wealth only to lose it in a blink of an eye.

Life is unpredictable.

That is why we need to be properly insured to weather whatever storms it throws at us.

If you have not hit financial independence and rely on wages from work to provide for your family, then disability insurance is a must.

For physicians who can be the sole large breadwinner this is of utmost importance.

Other potential catastrophic events can also be mitigated by adequate insurance coverage.

Besides the standard home and auto insurance, a high net worth, or aspiring high net worth, individual needs to further build walls to protect his or her wealth.

An umbrella insurance is a wonderful and inexpensive way to protect against claims that can dwarf your normal insurance coverage.

Much like an umbrella is designed to shield you in a downpour, umbrella coverage helps to deflect claims that would otherwise fall directly on you.

I truly do not believe this is an optional insurance and a good starting amount to be insured for is your current net worth or your anticipated final net worth.

A side note that may be of importance when you are deciding exactly how much umbrella policy you should get:  If you have a net worth target you are striving for, I personally suggest getting an umbrella insurance that equals it.

Even if your net worth is not there yet, the difference in price can only be a few hundred dollars a year.

I suggest this because of what happened to me personally.

I originally got an umbrella policy that my net worth soon surpassed.

I wanted to raise the coverage to double the initial amount as it would adequately cover my goal net worth.

However I was denied this increase in coverage because in the interval I had a claim on my auto insurance policy (I ran into some road debris and filed a claim totaling around $4k).

Because I had this black mark on my record, the insurance agent told me that I would be denied until it came off my record (3 years).

If I had originally asked for this amount prior to the claim I would have had no problem receiving it.

Now I have to wait till the time expires from my one and only claim on this policy.

As a physician practicing in a litigious society it is also vital to have adequate malpractice insurance to minimize your risk of a claim raiding your personal assets.

 

 

I totally understand.

By completing these tasks you do not derive immediate gratification for it.

But you are not trying to always please your younger self, who can adequately fend for him/herself (by working longer, etc).

It is when you are retired and older and have less resources that you will be most vulnerable.

As the old saying goes, “You’ve made your bed.  Now lie in it.”

Just make sure it is as comfy as you can make it.

Your future self will thank you.

 

 

 

 

Note:

If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”

Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.

 

 

-Xrayvsn