Understanding Step One: Managing Deductibles in Personal Finance

Understanding your highest deductible is crucial for avoiding financial emergencies and making informed decisions.

### Understanding Step One of the Financial Order of Operations: Deductibles Covered
* 💰  The Financial Order of Operations is a step-by-step guide for managing your finances, with Step One being "**Deductibles Covered**."
* 🚑  This step is crucial for **protecting yourself from financial emergencies** by ensuring you have **enough savings to cover the deductibles** on your insurance policies.
* 🏠  To determine the amount needed for Step One, look at the deductibles on your homeowners/renters, auto, and health insurance policies, and select the **highest amount**.
* 📈  The goal is to prevent having to rely on **high-interest credit cards during emergencies**, which can lead to **long-term financial struggles**.
* 🔄  The recommended amount for Step One is not a fixed number like **$1,000**, but rather the **highest deductible amount** among your insurance policies.
* 🌱  Step One is designed to grow with you as your financial situation changes, adjusting to **higher deductibles** as you acquire **more assets and insurance coverage**.
* 💡  While it may be tempting to simplify Step One to a specific dollar amount, it's important to **customize it based on individual circumstances** to provide **adequate protection**.
* 📘  The Financial Order of Operations is a personalized approach to financial planning that considers **individual needs and risks**, rather than offering **generic advice**.

[Music] fast Teddy 333 has a question for you. Hey, I see fast dy. I see, I see them in here a lot. I recognize that name. It says, Can you explain step number one? I really don't understand how much I would need to fulfill step number one in the foo. This is back to the basics, you know. I love this. Go back. I'm going to do the intro. I want you to talk about it, 'cause in the book, you like really, you dove into this pretty deep. For those of you that don't know, we think there is a tried-and-true process to what you should do with your next dollar. BR, we hold the thing up. We have this thing called the final order of operations. Got a mess over here. If you want your free copy, you can go to moneyguy.com/resources and download it. The very first step that fast stage is alluding to is high is deductibles covered. And so, Brian, we've had people ask us so many questions because there are other folks say, Hey, just a th000 bucks. Hey, a th000.

bucks, that's what you need. And we thought about it, and we were like, Well, is a th000 bucks the right? Maybe, maybe not. There's more to it, more nuance than that. That's how we came over the deductibles. Yeah, I mean, if you think about how many bankruptcies, and people just being crushed financially, it's typically an emergency. It's the unforeseen things that happen to you, whether it's medical, whether it's a car accident, whe, you know, just all kind of thing. It could just, it could even be appliances in your house going out, or you having, you know, leaker, a roof leak or something like that. It's all those things that lead you to make desperate decisions. You know what happens when you make a desperate decision in an emergency? If you go and you lean into the credit card, and now you're paying interest of greater than 20% on these credit cards if you don't pay them off, that is not good. You're actually digging a hole for your future.

self that you're just not going to be able to get out of. So we were like, we have to protect people from making those desperate decisions. And the best way you can do that is you got to know what are the big risks in your life. And what I have found when we were doing our research on this, all the big risks have some type of insurance protection that you can actually buy to completely take away that risk. So that's why when we talk about deductibles covered, all you have to do to complete Step One is go look at your homeowners or your renters insurance, look at your car or automotive policy, look at your health insurance, figure out what your deductible is on every one of those insurance policies, and then whatever the highest number of that list, that is Step number one. Because I'm not saying add them all up, that's a bridge too far because that would get into emergency reserves of Step Four. Highest deductible with Step One is just to get to the highest point. So then you

can move on to that free money from your employer with the match and then paying down the high-interest debt with step three. The highest deductible covered is going to get you through that avoiding those desperate decisions. And what I love about is that it grows with you like the highest deductible for a 22-year-old that just graduated college. And maybe the only thing they have going on is they've got, you know, health insurance through work and maybe they're paying their auto insurance or maybe they're still on parents. The deductible, the highest deductible may be pretty small, but then as you buy your own car, as you get on your own health insurance, as you go to buy a house, well then your highest deductible grows. So step one grows with you through your financial journey. I just love that it meets people where they are. That's what we want the food to do. We want to be applicable whether you're 22 and just starting out or whether you're 62 planning for the next phase. I would love

'Cause it is so much easier to say $1,000, but that doesn't really protect you. I mean, there's a good chance you might have a false sense of protection at a $1,000. I know it's simpler. I know it's easier, but that's the problem with personal finances. It is very personal, and that's why when we were writing the deeper dive in millionaire mission was to actually tell the people why, share the stories that inspired it all, so that you kind of come better as you get more and more educated on it. I wish it was. I wish I could make it even easier by putting something like $1,000, but it just doesn't work that way. If you're going to be really good with money.

Step #1 of the Financial Order of Operations Explained

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Understanding Step One: High Deductibles Covered

Step one in the financial process is about covering high deductibles, which can vary for each individual.

Emergencies, such as medical issues or car accidents, often lead to financial crises and desperate decisions.

Relying on credit cards with high interest rates during these emergencies can create a detrimental cycle, making it important to have a plan in place.

Identifying and Managing Life's Big Risks

Understanding and mitigating life's big risks is crucial to avoid desperate decisions.

Insurance protection is available for all major risks, making it possible to eliminate them.

The first step in managing these risks is to identify the highest deductible from your homeowners, renters, car, and health insurance policies.

The Importance of a Growing Highest Deductible

The highest deductible covered by an employer's match can help avoid desperate financial decisions.

It is designed to grow with an individual's life changes, from a small deductible for a recent graduate to a larger one as they take on more responsibilities.

This approach aims to meet people at different stages of their financial journey, making it applicable for anyone from 22 to 62 years old.

Setting a simple financial goal, like $1,000, can create a false sense of security.

Personal finances are unique to each individual, making them complex and challenging.

The aim of the millionaire mission is to educate and inspire people through shared stories and deeper insights.