How to Manage Risk – Before the Worst Happens

Anna: Shift to the second part of our conversation today, which might even be in a separate episode. This might be Part 2 of our group with Danielle McKinley. It’s been great so far. Go check out Part 1 where we discussed a different mindset to budgeting from more of a contentment angle. And now we’re going to get into risk in finance. There’s so many different sides to it and it can seem really scary. You have the risks of having money in the stock market if you’re investing in risky stocks. There is day-to-day risks that insurance might cover. There’s the question of what life insurance should I get? There’s the question of what happens if I lose my job and everything crashes tomorrow? There’s no good way heavily on a person. Is that something you see a lot with your clients and just people you’ve met with and worked with over the years?

Danielle: Yeah, absolutely. And I think that what happens is we’re subconsciously wired for protection. Our ego is there to protect us, our primal instinct is protection. And so a lot of times when these thoughts and feelings come up, what do we do? We’re like, that would be terrible. I don’t want to think about it. And so we’ll kind of table it. And so I refer to it as a contingency plan, most businesses have a contingency plan, right? So what’s your contingency plan for you as the ultimate asset of your life, the engine of your life that’s making it all happen. What are you doing to protect your legacy? And a lot of times that is jarring for people because they’re like, my gosh, that’s right. I really am the biggest asset in everything that I’m doing.

And so that’s where getting into contingency planning isn’t just a business strategy. It’s not something that just business owners do. It’s something that every human being should be doing because we are all here to do cool things. We’re all here to make an impact. We all want our life to be meaningful. So having said that, what are we going to do to protect it so that we’re best set up to make that impact and to show up in life the way that we want to through that contentment filter.

Anna: What’s that? Are there any misconceptions that you hear a lot when people are thinking about risk and how to take on risk and how to protect yourself from risk? Is there any big ideas about it that people have walking into a conversation that their perspective might shift after they’ve thought about it for a little bit longer?

Danielle: Yeah. It’s all deeply personal. Because it’s what fears, what assumptions do you have? What’s your money story? Those all play a part to how somebody shows up to a contingency plan. Our level of risk is different. That’s why when you’re setting up your retirement plan with a financial advisor, they ask you what’s your comfort level of risk, which I think is silly because how would you know that if you haven’t defined the other thing?

By going through the process that we talked about in Part 1, we’re going to be able to uncover OK, your risk comfort level is X right now. Misconceptions, there are loads of misconceptions about life insurance and they’re all over the place and that stems from a lot of things. It stems from bad actors. All industries have them. It stems from you don’t know what you don’t know. And I’m a big believer that what you don’t know can be worse for you than what you do know in some cases. There’s a couple of different elements that play into it getting a bad reputation. And a lot of misconceptions coming from some people might think even hearing all of this, they have a handle on their budget, handle on their finances. They might be making a decent amount of money, maybe falling into this higher earner, not rich category that we were talking about earlier. A lot of them might think they don’t need life insurance or let’s say they have their own business, they might not think they need insurance for that business because they have the money. It’ll be OK.

Anna: Is that true? Is that not true? And why might that be the case?

Danielle: Yes and no. There’s truth and there isn’t truth. It all depends on what are your goals. So if you would rather if something happened to you, a car accident that you were in a coma, if you got diagnosed with terminal illness, if you developed cancer, if any of those things happen and you’re OK with pulling funds from somewhere else and not having them immediately replenished, sure. But most people would love if they had a crystal ball and knew that if something happened to them, that they would have funds sitting there for them. That would cover the incident and not affect anything in their plan, not set their business back any steps, not affect their team or their family, or create any additional financial stress. They would be like, yeah, I want that. That’s life insurance.

Anna: And I think you’re so right. It’s very much a person to person situation. As we were talking about budgeting and planning out your money earlier, that’s also a very person to person situation. Something that works for someone might not work for someone else. And honestly, that’s true of almost every single aspect of finance, all of the parts of risk mitigation. What works for someone might not work for someone else. And that’s sometimes weird for people to think about because money on paper is just so numerical. But it has this really deep emotional side to it that a lot of people just either aren’t aware exists or just discount entirely.

Danielle: Yeah. And that’s where when you start to think about it like a car. If the engine in a car is affected and broken, nothing else in the car works. So if you’re the engine of your life, you’re the car and you’re responsible for your family, for your team, if you run a business, for your car, for your house, for your kids, if you have them, for family members that may rely on you and your engine breaks, what’s your backup plan? And that’s really what it is. The legacy that you’re building. And so when you think of it like here you are as a car and then you’ve got all these legs of the things you’re responsible for, draw a big circle around all those things. That’s what life insurance protects. It protects everything. And when we’re talking about building generational wealth for either people that have come from it and they want to keep building that up or maybe people that are newly rich, they’re this new wealth that they want to continue on for their children, for their grandchildren. Making sure that there is some contingency plan, some backup plan, some Plan B in place in case something happens is super important both on a life insurance side of it, but also the other insurance side of it. What your plan is in place and that’s covered by insurance, that’s covered by emergency funds, that’s covered by how you’re going to bucket your money, where you’re going to save it, where you’re going to spend it. It kind of all ties together, doesn’t it? Everything doesn’t exist in a vacuum.

Anna: No, it definitely all ties together and it’s not life insurance is the protection, but it doesn’t replace the strategy of a 401K and HSAA Roth IRA and the tax benefits that those have for you. But it is something that protects those strategies when structured properly because there are some and you even I thought you were going there. Where it’s the myth, the biggest misconception about life insurance is that it’s a death benefit and that’s it.

Danielle: And that couldn’t be further from the truth. There are options where it is structured just as that, but when properly structured, it comes with living benefits that protect you in scenarios like a car accident where you’re in a coma, a cancer diagnosis or a terminal illness and also have the opportunity to build generational wealth within the policy so they can be a cash earner, which diversifies your overall strategy. And it’s there to protect all those other buckets. It’s a lot more than just a check.

Anna: It is so much more than just a check when we talk about how do you want to feel and not feeling that stress or that risk, it is the peace of mind that’s in the overall. What got you into the life insurance place in the first place? I know we talked a lot about your consulting in general with people and their money plans. What brought this part into the equation?

Danielle: When I sold my company, I still wanted to work with a lot of my clients and I wasn’t able to under certain competes and things. There were certain areas I couldn’t play in. And then my husband is a CFP and he’s like, you should really think about getting your life insurance license because at my company the policy, the options we have for people aren’t great, and I would love to be able to refer out to you. And I was like, that’s interesting. I love helping people. So as I was getting licensed and going through the process with my business background and the way that my brain works, I understood it really quick that it wasn’t being used. The industry isn’t using it in the best way possible. What’s happening is that people are getting licensed and they’re working for a firm and they’re selling one to maybe 5 different products and structures and that’s it. And there are so many ways to structure this.

I started to see that and then I discovered the infinite banking model through whole life insurance and I was so upset because when I sold my company I didn’t know about this model and it is a strategy that I would have used. And so because of that I became really passionate about helping people protect what they’re building but then once they’re really making a lot of money and they have excess and we’re wanting to really get creative with the plan. Teaching them the infinite banking model because the fact that that isn’t taught in school or even in business is mind blowing to me because had I known about that one strategy, I would have structured my exit completely.

And so that really lit a fire. And then I love being a disruptor in industries. And I just think that this particular industry can do so much better and so much more good than what’s happening now. So I’m on a mission to do that.

Anna: A lot of the times, even myself, with just the amount of finance knowledge that people in our industry take in on a daily basis. Life insurance just seems like OK, if you call up a company like OK, you have this choice or you have this choice, pick one. No, there’s more to it than that. There’s a lot more than that. A lot of people will assume that OK, there’s three main types, there’s term policy, there’s an IUL and there’s whole life. Of those three types, they can be structured hundreds of different ways. So it’s based on your health, habits and age, because that’s another thing that we should probably talk about. Is there a misconception that I’m young I don’t need it? And everyone needs it. I have it even on my children because the sooner you get it, the more cost effective it is. And if an incident occurs or you get diagnosed with diabetes or cancer, you may not be able to get the coverage that you want. So there’s way more than the three categories, then there’s hundreds of ways to structure them beyond that.

And bring up a point that we kind of brushed over. As I like the back of my mind is running over the course of our conversation, I’m realizing just how important this is when you’re thinking about how are you going to mitigate the risks in your portfolio, in your life, in your business, if you have one. That life insurance doesn’t replace any of the other strategies. It’s a supplement to it. And the type of life insurance or the type of any really insurance that you pick can be tailored to your situation and that it’s a nice extra layer, but that doesn’t mean that everything else you’re doing doesn’t matter.

Danielle: Not even can be tailored. Should be tailored. So the right agent isn’t going to just offer you a policy. They need to really get into your contentment filter. What are your plans? Where are you going? What excess funds do you have? What’s your budget? How much dollars can you assign a job to life insurance? It is not a replacement. It’s a part of your strategy. But just a 401K is important and future planning is important, it’s also important to protect that plan.

And in my opinion and what I teach, it’s a non-negotiable in your overall financial plan. It’s a piece that should be there and should be looked at the same as having a 401K, having a retirement. It’s one of those topics that seems when you’re just briefly reading an article about it, very surface level and boring. But when you get into it, there is more detail to it and I think a lot of people aren’t aware of the amount of detail that goes into it.

Anna: What advice do you have to someone who’s thinking about getting life insurance and they’re like, OK, this is what I want, but they have no idea where to go from there? What are some of the things they should keep in mind when they’re trying to find a plan that works for them?

Danielle: It’s going to be finding the right advisor. The right agent to help you structure, really understanding, walking in like, what are you trying to protect? What are your goals? But sometimes you may not know because it is something that there isn’t a lot of education on. So understanding, do you want to grow cash in it? Do you only have funds right now where you’re like I just want to protect this if I get cancer and that’s I need some living benefits and that’s it? It’s really understanding. It’s hard to say without talking to each individual person but you want to ask some key questions to the person you reach out to. I recommend finding a nationwide broker because a nationwide broker is going to have access to all states, which means they understand more regulatory compliance and they have access to more carriers.

You don’t want somebody who’s just with one specific company because then they’re trained on that company’s policy. You want an agent that really is going to go after what is the best case scenario for you as the individual, not their commission check, or the way that they were trained because these agents that work there doesn’t mean they’re bad people, it just means they’re only as good as the information that they’ve been given. And really understanding is it are you looking to use it as a creative finance mechanism? Are you looking to use it as simply a death benefit when you graduate to the other side? You have to understand what your goal is, but sometimes your understanding may be skewed based on the level of information that you have. So somebody who is an expert can help you understand how there may be a better way. It’s really that you got to be open to getting more information. Being informed is important, especially for these super personalized things, I mean all aspects of finance are super personalized, but especially these pieces that are so complex and tied to so many different areas of your non-financial and financial life.

Anna: And just make sure you’re doing your due diligence on the place that you’re working and how you’re going about it. Before we close out for the day, is there anything that you’d like to get into a little more detail on or touch upon that we didn’t quite get to?

Danielle: Such a loaded question and how much time do we have? Can we talk forever? I just love this stuff. I think my give back for the listeners would be that if you’re feeling stressed about money, that is normal. If you’re feeling overwhelmed with all of this, you’re not alone. So when I go and speak on money, I often ask, how many of you became an entrepreneur, took this job because you wanted to make a bigger impact or you wanted more freedom and flexibility? And everyone’s hands go up and I ask everybody to look around, keep your hand up and everybody look around. And then I ask them, OK, what do those things require? And they require money. So then the follow up question is has money never stressed you out, felt intimidating or maybe even a bit like a foreign language. Put your hands back up. Everyone’s hands go up. So the big take away here is that you don’t have to learn it all in one sitting. You don’t necessarily have to become a money expert in order to feel comfortable and content with your money plan. The way that you interact with money, the way that you save and spend and teach your kids and lead your team can all be resolved. You can feel good about it. It’s being willing to get familiar and start to learn enough to get there. So know that you’re not alone and be willing to reach out for help. You don’t have to feel stressed about money. That’s super important. You don’t have to learn it all at once because there’s so much to learn. And I think that other would even hit home more is you’re not it seems like you’re the only one who doesn’t know what they’re doing with money, especially if you’re earning a lot. If you feel like OK, I’m in this higher income bracket, I should know what I’m doing, but you don’t really know what you’re doing. That’s normal. That’s fine. It’s so complicated. And tackling it one little bit at a time is going to get you somewhere.

Anna: Yeah. And I would say our high earners that are listening to this, I see it the most with you. And it’s because you made the money. And so now somewhere you told yourself this story that because you made the money, you’re now supposed to know what to do with the money. And nobody is just born knowing what to do with money. So ask for help, reach out, find the resources and just know that it’s OK and all that is doing that shame and those feelings that are coming up, those are just nudges to go get a plan and to upgrade the jobs that you’re assigning your dollars. That’s all that it is.

Danielle: Thank you so much for coming on today for this recording. It was a fantastic conversation. I’m sure our listeners out there got a ton from this. On keeping your attitude about money in check, understanding yourself and where you’re coming from and what you can do to go from there. If you like this conversation, please subscribe to our newsletter, Your Wealth Blueprint over on our website. You can go over to the newsletter tab and take a look at all of our additions, and you’ll also be notified when new episodes like this come out. Thank you so much, Danielle, for coming on today.

Anna: Yeah, thank you.