Insure for Catastrophe, Not Inconvenience! | Series 6.6 - Enjoy More 30s: Family Finance

Episode 6

Insure for Catastrophe, Not Inconvenience! | Series 6.6

Published on: 7th February, 2022

What parts of this ship are actually worth insuring?

  • ...from what I've many times seen, people tend to not insure for all the catastrophes that they should. They may insure their iPhone, but not their lives, for example. (05:29)
  • Disability insurance on the other hand, because you are actually much more likely to be disabled than you are to die as a young person, it can be a little bit more [expensive]. But again, you can kind of tailor it any way you want. (06:38)
  • And the line that I always share with young people is, and this is the one that motivated me, if I was to die today, is the relative that would be the loudest and the most convincing in a courtroom, would that be the person I would actually want to raise my child? (07:55)

Quote for the episode: "Understand that there is insurance for almost anything, but this general concept of catastrophe versus inconvenience, can help you know what is worth insuring what you have absolutely have to insure like your life, or your income potential." (08:40)

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Transcript
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Welcome to the EnjoyMore30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

Joseph Okaly:

Hello, and welcome once again to EnjoyMore30s

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Family Finance podcast. Every week, I'm here trying to talk to

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you about money so you can take those steps forward, gain that

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confidence and therefore really remove that financial anxiety

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that you may be having so you can focus solely on making your

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life more enjoyable to you and to your family. This series is

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all about the new year, and the new you along with that, Setting

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Your Compass for the New Year.

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As always, if you like what you're hearing, please make sure

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to subscribe, follow us on Apple podcasts wherever you listen.

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Clicking that star, leaving those reviews, it really really

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does help us reach the other of millions of other young families

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out there that are just like you.

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So far this season, we covered setting your compass with your

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spouse. So pretty much joint goal setting, then we discuss

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the importance of actually paying yourself first, you know

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giving some of that hard earned money to yourself each month to

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reach the goals that you would actually want to to make you

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happier. And then we covered bucketing your goals. So setting

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separate accounts for each goal. That way you can easily track

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them, you can more easily achieve them. And then the next

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episode was kind of an extension of this with what I call money

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blocking. So again, setting funds aside, but this time is

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setting them aside for kind of those smaller daily things that

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monthly massage, kind of things like

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that. Finally, last week, reaching the importance of using

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the right fit for each investment. So we've got those

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buckets, but we want to make sure we're using the right

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investment for each one. Too conservative may mean not

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reaching your goals. So if you've missed any of those

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episodes yet, I would definitely obviously recommend you check

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them out soon.

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Today's episode is titled Insure For Catastrophe, Not

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Inconvenience, exclamation point where we are going to cover the

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mentality that I would recommend when looking at which pieces of

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this trip we're designing are the most important to insure.

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What parts of this ship are actually worth insuring? So the

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goal for today's episode is to understand that there is

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insurance for pretty much anything that you want to buy

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insurance for out there. But this general concept of

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catastrophe vs inconvenience can really help you know what is

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worth insuring, and what maybe isn't. When you think of all the

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parts of this ship, there are some that are just going to be

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more important than others. But you may be able to get insurance

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if you really wanted to on any of them. That doesn't mean that

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you should. Insuring the hull of the ship, for example, though,

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is much more important than say insuring one of the nails on the

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ship. If the hull breaks, we're kind of in a big problem, though

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the whole ship is pretty much worthless, the journey is lost,

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you know, we don't want any of that to happen. If one nail

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comes out, comes loose, breaks, that ship keeps on going. And

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you can afford to put in another nail.

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If you think of your daily life, there are certain insurances

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that everybody has. Homeowners insurance, for example, you

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cannot have a mortgage without having homeowners insurance. The

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bank says you really need to have this because if the house

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burns down, we don't want to lose our investment our loan

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that we made to you. Now generally, it might add, say,

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you know, $100 a month to your your budget, something kind of

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like that. So it's something that's affordable, you know, we

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don't enjoy paying for it, but it's affordable. If they didn't

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make you get homeowners insurance, though, if they

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didn't make me specifically get it, I would still 100% have it.

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The reason is because if my house God forbid, burned down, I

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don't have $400,000, sitting to the side to you know, rebuild my

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house in the next week or whatever it might actually cost.

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That would be a catastrophe that would basically ruin my family

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financially. On the other hand, I can get insurance for

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somethings normally in the form of an additional warranty or

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something like that for let's say, my washing machine. But I

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don't know if my washing machine goes, it will be annoying. I'll

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be kind of irritated. I'll have to buy a new one. But it's not

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going to ruin me by any means financially. I can come up with

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a few 100 bucks if I have to, you know and getting a new

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machine. It's an inconvenience, not a catastrophe. Now, if you

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want to get insurance for your washing machine, that additional

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warranty you can but the point is that there's a difference

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between insuring things that if you get the insurance or not,

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you know, it's going to be okay either way. First things where

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if you don't have the insurance, it's going to be a catastrophe,

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and you may be ruined financially. So this is a big

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deal, if you don't have the proper coverage. Cars can be the

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same way we have to get the insurance, but don't need to buy

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the additional warranties. So if you again, if you had the

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financial flexibility, the additional warranty makes you

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able to sleep at night. Sure, you know, go ahead and get it,

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that's your call. And sleeping at night is you know, that's

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important. But as a rule of thumb, you again want to just

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really make sure that you're insuring for those catastrophe

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scenarios at a minimum.

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And the thing is, from what I've many times seen, people tend to

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not insure for all the catastrophes that they should.

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They may insure their iPhone, but not their lives, for

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example. Homes, cars, those are easy, because they make you get

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the insurance, you don't have a choice many times. They don't

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make you get life insurance, they don't make you get

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disability insurance. And as a young family, dying or becoming

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disabled, you know, they're not on your top of your list to

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think about, but both of these kinds of things are protecting

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your greatest asset. The most important asset that you have as

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a young person, and that is your future earning potential. So

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over the next 30 years, this is likely to add up to millions of

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dollars. Life insurance is really the easier of these two,

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because as a young healthy person, you might be able to

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get, say a 30 year term insurance policy that has a

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value of 1 to $2 million or more and not have to break the bank

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financially, it depending on where you live your health, you

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know, it could be maybe $100 a month, you know, in that kind of

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just very, very rough general range.

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Disability insurance on the other hand, because you are

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actually much more likely to be disabled than you are to die as

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a young person, it can be a little bit more. But again, you

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can kind of tailor it any way you want. If you want to say you

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know have to wait for six months for the cover to to kick in

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instead of three months then it's cheaper. So like in New

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Jersey, the state provides you with some short term disability

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for this first six months. So that makes sense for somebody

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living in New Jersey, that that kind of thing. But again, we're

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focusing on the catastrophic. If you can't work for three months,

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you know, it would kind of stink, wouldn't be great. But

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you're likely to recover for that. If you can't work for 2

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years, 5 years, 10 years, that's a really big problem. So there's

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that catastrophic scenario kicking in again.

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The last catastrophic kind of thing, which isn't exactly

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Overall, there are a ton of times that you come across

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insurance, but it's an add on that I really want to put in

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here is that we see way too many young families with kids that

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don't have a will or their other important legal documents. So

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who will raise your children? Who will be in charge of their

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insurances, warranties, things of that nature, that you can

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finances? These are huge decisions. Is getting a will

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fun? Absolutely, 100% not, you have to think about yourself

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dying, not fun, but it's very, very necessary. And the line

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that I always share with young people is, and this is the one

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buy, and we can't cover all of them here today. But just

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that motivated me, if I was to die today is the relative that

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would be the loudest and the most convincing in a courtroom,

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would that be the person I would actually want to raise my child?

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So more times than not when I say this to a young family, I

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see very anxious faces and you know, looks going back in

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remember this higher level concept to help you in that

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between the you know, the husband and the wife. So, you

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know, this is something that motivated me, and I've seen it

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motivate other people as well.

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decision making process. Understand that there is

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insurance for almost anything, but this general concept of

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catastrophe versus inconvenience, can help you know

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Thanks for tuning in today, as always, and join us for next

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week's episode called Diversify, But With One Advisor, where

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we're going to cover some very important differences between

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what is worth insuring what you have absolutely have to insure

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diversification vs having multiple advisors. And why you

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don't need the latter, the multiple advisors to have the

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former diversification. Again, a fancy way of saying spread out

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your money well.

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Overall, if you are able to implement what we cover today,

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like your life, or your income potential. And what you know,

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that's great. That's fantastic. You have less to worry about

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than before and you can focus more on just really enjoying

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your life. If you are wanting help with these things though,

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always remember that feel free to reach out to me ask

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questions, check out my website, www.enjoymore30s.com. That's

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maybe isn't necessary, like you know, the washing machine.

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enjoymore30s.com There's an Ask Joe section on there. Shoot me

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an email and just reach out I'd be happy to help any way that I

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can. Until next week. Thanks for joining me today and I look

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forward to connecting with you soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax, or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor, Member FINRA/SIPC.

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About the Podcast

Enjoy More 30s: Family Finance
Family Finance for Young Professionals.
Young families receive little to no personal finance help. We all grow up to have jobs and money, yet our education system focuses on Shakespeare and Algebra. Even professional advice can be hard to come by, with the majority of the industry chasing retirees and existing wealth.

Joe Okaly's podcast is aiming to change this, providing personal financial advice geared specifically to professionals with young families. This podcast is dedicated to making life more enjoyable for young families, by hitting on the financial topics that tend to weigh on us, stress us out, and distract our focus from simply enjoying life.

Joseph P Okaly is a CFP Certified Financial Advisor who fits directly in with who this podcast is focused on - a young professional with a family. With over a decade of experience as an advisor, there is passion and knowledge to make a difference.

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC. TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.