Why a Financial Analysis Should Come Before Any Product

Buying a financial product before you understand your own numbers is like taking medicine before anyone has made a diagnosis. It might help. There is no way to know, and no way to know what it cost you instead.

Having spent twenty-five years in technology, I saw firsthand that projects run smoothest when you define what you need before shopping for software. When you pick a tool first, it rarely turns out to be the right fit. Your finances work the very same way.

Two ways this goes wrong

The first is buying what someone else has. A coworker mentions a policy. An ad shows up in a week when you were already worried. The product arrives before the question does.

The second is quieter and more common. Families end up well covered on things that barely matter. They end up badly exposed on the things that would actually break them. I have seen a small policy on a child, bought years ago, while the parent earning the money carried almost nothing. That was never a decision anyone made. It built up one reasonable-looking decision at a time.

What we actually look at

The analysis is a conversation, not paperwork. There is no application to fill in and nothing to sign.

We start with what comes in and what goes out. Then the people who depend on that money, and what would happen to them if it stopped on a Tuesday. Debts get written down as what you still owe, not what you pay each month. We also read the policy at work, because most people have never checked what it covers, and it usually ends when the job does.

After that comes the part most people have never written down: where you want to be in five years, in ten, and in thirty. Retirement is the obvious one. It is rarely the only one.

The gap between those two pictures is the whole point. Everything after it is just math.

What it asks of you

About half an hour, and a willingness to say some real numbers out loud.

Rough numbers are fine: what you earn, what you owe, and what coverage and savings you already have. There is no need to bring statements. If you do not know what your work policy covers, that is a normal answer, and finding out is useful on its own.

Why the order matters more than the product

Once you can see the picture, most decisions get easier and a few disappear. "Should I buy this" turns into "does this close any part of that gap." The second question has an answer you can check.

It also protects you from me. If you know your own numbers, you can weigh what I recommend against something better than how convincing I sounded. That is a stronger position for you. It also makes for a better conversation.

Working out how much life insurance you need is a separate job. The math for it is in How Much Life Insurance Do You Actually Need?. That calculation only works once the picture underneath it is clear.

You keep it either way

Whether or not we ever do business, you leave knowing where you stand. That has value on its own, and it is yours regardless.

Most people have never seen their own finances on a single page. It is a strange thing to look at. Almost everyone finds it a relief rather than the telling-off they expected.

If someone you know is about to buy a financial product because it sounded urgent, pass this along.

If you would like to see your own picture on one page, I am happy to walk through it with you.