The thought came to me last week as to what should the priority of my liabilities be, in my life now but also when I ventured out into the working world for the first time and hence for someone else in this position. You could call them priority spends, I thought of them as liabilities.
Number one, I should protect my income. Our ability to earn an income is our greatest asset. So this means that #1 liability spend is disability income protection. Medical aid could be put in before this but one can go to a state hospital. So there is a possibility of something. No disability cover: nothing.
Number two is saving for retirement. Or whatever one wants to call those later years when either your employment contract says you must pack up your desk and leave or when no one wants to give you work anymore or when you can’t work anymore, due to a health reasons. Yes, retirement funding must be viewed as a liability and I put it at # 2. Because if you don’t have # 1, you have no income to save for # 2.
Number three would become my house. Remember its not an asset.
A car might have come into your life somewhere when you were maybe even a student. Hence you may have had something to get you to your first job. I already had my second VW Beetle when I started working as a teacher. The first one I drove into a telephone pole. But spending more on a car needs to be after # 1, 2 and 3 above.
Around #1… A client told me this week of someone at work whose 26 year old son was in a serious car accident and now has certain issues and problems that will prevent him from holding down a job ever again. He had no disability protection. This liability had not been in place. Thus he becomes a financial burden to his family for the rest of his life. Money can be left for his future through life insurance, but no additional money can be created now. Sure there is a small state disability grant to be had, but not much.
So, with someone’s first salary in their working life, disability and retirement funding must start. If someone gets a job that includes employee benefits, they will get some of this straight away. But not always with disability income protection.