“Daddy,” my eight-year-old suddenly piped up from the back seat of my car, “did cars have seat belts when you were little?”
I had to laugh. Some of the most random conversations I have with my kids come in the broken silence of a car ride. “Of course they did,” I responded. And then out of sheer curiosity, I asked, “How old do you think I am?”
There was a brief silence as each of my three boys sat quietly – no doubt envisioning me as a child dodging rogue dinosaurs in a Flintstones-style pedal car.
The silence was broken by my four-year-old. “Well… kind of old, right Daddy?”
Hard to argue with that logic. But “kind of old” still doesn’t place me at a point in time to remember cars without seatbelts. Seatbelts were made mandatory for all new vehicles in 1968 – quite a few years before I came into existence. Honestly, I would have guessed that they were mandated even earlier.
Despite how synonymous seat belts are with safety today, many still don’t use them. It surprised me to learn that New Hampshire doesn’t even have an adult seat belt law. It also made me think how often some ignore the safety of proverbial financial seat belts.
Think of financial seat belts as those essential habits, tools, and strategies that protect you from financial crashes. They might not be glamorous, but they can be lifesavers when unexpected bumps in the road occur. Here are some examples:
- Emergency Fund: This is a classic example. Like a physical seat belt in a sudden stop, an emergency fund (typically 3-6 months of living expenses) cushions the blow of job loss, unexpected medical bills, or when that Flintstones pedal car breaks down.
- Investment Diversity: Regular readers of Basis Points know that one of my soapboxes is investment diversity. Relying solely on a few investment sources is reckless driving that can lead to significant financial loss.
- Appropriate Insurance Coverage: Carrying various types of insurance (health, homeowner’s/renter’s, disability, or life) protect against unforeseen circumstances (and sometimes even literally against other reckless drivers).
- Tracking Expenses: Knowing where your money is going is your road map. A budget keeps you from veering too far off course.
- Avoiding Debt: Debt is like driving an oversized load – it limits maneuverability and increases the risk of a breakdown. Avoiding debt frees up cash flow and provides financial flexibility.
- Investing for the Long Term: When I first learned to drive, I was taught not to just pay attention to the car in front of me, but also the ones in front of it. Long-term investments focus on retirement and future goals further down the road.
- Regular Financial Check-ups: Just as you maintain your car, regularly reviewing your finances, insurance policies, and investment portfolio with a financial planner helps you identify potential problems and make necessary adjustments.
Seatbelts don’t eliminate risks, but they do mitigate them. So, buckle up and navigate your financial journey with greater confidence and peace of mind. After all, driving without seatbelts is “kind of old” thinking, right?