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Financial Shielding: What is it and why do I need it

Every day I have the opportunity to talk to people of all ages, especially young people aged 25-30 who feel a strong need to save and invest because they believe it's the only way to be prepared for any unforeseen circumstances. While I applaud their desire to invest, it's crucial for them to understand that investing or saving is a significant step towards improving their finances and an essential habit... but it's not enough to protect our entire wealth.


And I'm not just saying this because it's my job, it's a reality. Think about an adult you know who's 55-60 years old... they're probably nearing retirement, own a house or several, maybe a business, and cars or other properties... Now, imagine what would happen if: they were struck by an illness that racks up hospital bills in the millions, or if a family's main provider were to pass away suddenly. How would their family cope and maintain the same lifestyle without their primary source of income? Worse yet, imagine a young person just starting their career suffering a disability that permanently prevents them from working and earning income... Would the investment they started at 25 be enough? And if all three of these things were to happen at once... How much should they have saved or earned through their investments to manage all of this? I don't think any amount would suffice.

That's why, although it sounds grim, it's a possibility we all face, and no investment (unless it's ultra-millionaire level) can prevent these individuals from having to liquidate all the assets they worked for during their prime years - those houses, cars, properties, and businesses. This is where the famous financial needs pyramid comes in... like Maslow's, but focused on protecting the most important assets in our lives: ourselves.


And like any pyramid, we start from the base. Shielding the most important asset: YOU! And how do you protect yourself without needing to save millions of pesos? By investing in life insurance, which may not seem relevant to you (right now) if you don't have children, but with this financial instrument, you ENSURE that if something terrible were to happen to you, jeopardizing your life or ability to work, you'd receive millions of pesos as compensation.


Second step: Major medical expenses insurance. Yes, you might be thinking, "Why do I need it if I'm very healthy and young?" Exactly for that reason - the younger and healthier you are, the cheaper your major medical expenses insurance will be, which will be your greatest protection in case a hospital bill spirals out of control... because let's be honest, it's hard to have from $5,000,000 MXN to $35,000,000 MXN or more for hospital expenses.


The lack of prevention in major medical expenses is the cause of indebtedness, loss of income, and negative impact on your lifestyle. None of us want that, so take advantage of your youth and good health to protect yourself.


Saving: Now, with the previous bases covered, we can start thinking about saving and investing for the short, medium, and long term. Saving is a habit you'll always thank yourself for having because not only is it incredibly satisfying to achieve the goals you set for yourself, but you'll also always have the peace of mind that in case of any unforeseen circumstances, you won't have to go into debt or end up with nothing thanks to the savings you have. Saving is something we all should do! And don't worry, it's not about saving every penny you earn either. Many times we think about "YOLO," "That's why I work," and "I deserve it," haha, and yes, but everything is possible. The ideal is to have a monthly budget that allows you to know HOW MUCH you earn and HOW (and on what) you spend it. There's always room for treats, so here's an ideal rule to start your monthly budget if you're not sure where to begin: 50,30,20. This rule basically tells us that of our income, 50% goes to basics, 30% to savings, and 20% to luxuries.


PS. Never lower your savings, and if your income isn't enough for this distribution, try cutting back on basics like groceries and opting for cheaper rent. If that still doesn't cover it, then you might have to sacrifice some luxuries a bit, but do it, and you'll see that in a few months, you'll be much better off financially. Remember, it's all about balance.


And finally, saving for retirement and legacy... And if you've said to yourself, "Why save for my retirement? Surely I won't live that long..." I'm sorry to say that this is something I hear EVERY DAY, and it's a pretty incorrect thought. Although the hope for an early death is probable, the reality is different... In the past 10 years, the number of people who have surpassed 100 years has increased by 43%, so maybe you will. Plus, wouldn't you like that? You could be with your grandchildren... your grandma likes being with you. You could travel wherever you want without having to wait for someone to take care of you or without the need to keep working to support yourself.


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