Being under-prepared for financial setbacks may derail your financial independence, especially early on. In the later stages, you may choose to “self insure” some aspects of your life. Details of my personal financial firewall are listed below.

1. How to Make Your Money Last

Financial Independence is a two part process. First, you need to build enough wealth to cover your lifetime expenses. Second, you need to make sure the wealth will actually last the rest of your life. This book does a phenomenal job covering the latter. In addition to more familiar topics like investing and draw down, it also covers strategies for social security, medicare, pensions, annuities (including many cautions), and life insurance. Admittedly I am very far from using much of the info in this book, and I am also sure the laws and regulations will change several times before I reach traditional retirement age. But I nonetheless found the information reassuring and highly recommend it for anyone approaching or already in traditional retirement.

2. Emergency fund

We hold a minimum of six months of expenses in cash. We hold enough in our normal checking account to cover monthly bills etc., and then throw the rest in an Ally high yield savings account. We also hold any money earmarked for real estate or business investments in this account, which is why we sometimes have more than six months of expenses on hand.

3. Policy Genius for insurance

Buying insurance is, on average, a losing proposition. It has to be, otherwise insurance companies would not exist. However, by insuring against things you can’t afford to cover yourself, you can reduce your risk and actually strengthen you (or your family’s) financial position. If you need insurance–such as term life, long term disability, health, home, or auto insurance–I recommend using Policy Genius to shop multiple providers and secure the best rate. I used them to get my term life policy, and actually did a head-to-head trial against one of their competitors. Both companies came up with the same term life options, except Policy Genius got me approved before their competitor even sent me the forms to fill out. I’ll definitely use them moving forward.

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