Weighing the Cost

Airplane and Tornado

Last week a tornado ran for a half-mile through one of our fields, flattening a 200-yard wide strip of corn. What are the chances of that happening? It is a first for us in the 45 years we have farmed. This week, aerial applicators are spraying for aphids and white mold that are threatening north central Iowa soybeans. What are the chances of that happening?  Almost every year that it is wet.

Nearly every day, my husband is inspecting crops or livestock or grain in a bin, to ensure his investment of time, labor and money is insured or protected against accidents, extreme temperatures, weather, disease, mold or pests. The decision to spray, plant, vaccinate, buy, sell or insure is not made once and forgotten about.  He is always weighing the cost of action or inaction against the return on his investment.

The same is true for me on the home front. We purchased a used camper three years ago with the expectation we would use it for five year. Our decision to NOT insure the camper was based on how much five years of insurance would cost compared to the amount we paid for the camper.  The amount we saved in NOT purchasing insurance could easily replace the camper should something happen to it.  Basically, we SELF-INSURED the camper.

The same thought process is used for our vehicles. The nice, fully insured, used car we purchase for me to drive for work will eventually becomes the “farm” vehicle which we carry minimal insurance on. There is a very little chance of my husband having an accident driving down gravel roads between fields, whereas the number of miles I drive on highways for work greatly increases the chances I may have an accident and need to replace my car.

The Money Talk workbook discusses financial basics, insurance, investing, retirement planning, and planning for life events. This practical, clearly written guidebook is available through Iowa State University Extension should you like to learn more about financial basics including Insurance.

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Disability Insurance is often overlooked

Disability insurance is underused.  There are people who would never be without life insurance (“what would my family do if I was gone?”) but who have not purchased disability insurance.  They don’t realize that the same question applies:  What would your family do without your income?

For young adults, the risk that they will experience some disability before they retire is much greater than the risk that they will die before retiring.  What’s more, the financial cost of a wage-earner’s disability can be even greater than death — not only is the family’s income reduced, but they must also pay for medical care for the disabled individual.  Disability insurance is more important than many people realize.

At one time I had a job which didn’t offer disability insurance, but I didn’t want to neglect that aspect of financial security. I did some looking around and found I could purchase it through an association to which I belonged.

– Barb 

(Edited: 2/2/2020)

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Need to Hire a Financial Advisor?

I remember visiting once with a client who had fired her financial professional because he was not listening to her needs.  The financial professional had originally been hired by her husband, who had since passed away.  The advisor apparently failed to adapt  to the new situation, not meeting the needs and preferences of his new client.  As this woman’s story illustrates, a financial advisor is not a one-size-fits-all commodity; it is essential to hire an advisor who has the skills to suit your personal financial needs.

If you wish to seek help from a financial professional, a first step is to identify two or three possible candidates, and then interview them to make sure their style and experience are suitable for your goals.  Do you know the questions to ask?

First, ask about their qualifications.

  • Find out how long have they been working in this field?
  • Inquire about their educational qualifications and any designations, licenses, or certifications that they hold.  NOTE: if you feel like you are drowning in alphabet soup, be sure to ask them to explain each type of  accreditation.
  • Ask what types of continuing education they receive each year.

Learn about their typical clients and work experiences.  You’ll want to choose an advisor with experience that matches your needs.

  • Ask what share of their work focuses on each of the following issues: Retirement planning; Investment and asset management; Tax preparation; Estate planning; Insurance; Elder and long-term care planning; College education funding; Comprehensive financial planning; or other goals.
  • Ask about the income, wealth and risk tolerance of their typical clients, to make sure they have experience working with clients whose situations are similar to yours.

Find out what specific services they offer, and how they are paid.  Financial advisors are typically paid by either: 1) a flat fee or 2) receive a commission from sales of financial products.  Some advisors are paid through a combination of fee and commission.

  • What steps will they take in creating financial recommendations to meet your personal needs?
  • Will they provide a written plan?  What might it look like?
  • How many times or how often will you meet with them?
  • Will any potential conflicts of interests be disclosed in writing?
  • What fee or commission amounts are typically charged for various services?
  • Do they provide a written agreement which includes fees and services?
  • Do they follow a fiduciary standard or suitability standard for making financial recommendations?

By asking these questions of each potential financial professional, you will  better understand their qualifications, expertise and form of compensation.  Most importantly, you will select a financial advisor who is suitable to your needs.

Find more information at: http://www.extension.iastate.edu/investwisely/documents/news24.htm

(Edited: 2/2/2020)

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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