The month started with a prescient reminder of the importance of forethought, foundational planning, resisting recency bias, and recognizing how fragile our lives really are. As the fires raged two hours to the north of where I live, I found myself thinking how unfortunately accurate much of what we try to convey is, and how its a lesson that must often be learned the hard way.

The relentless criticism of Governor Newsom, Mayor Bass, and the bull dykes in charge of the LAFD are spot on, and it goes without saying that all individuals whose countless failures led to the unprecedented magnitude of the fires should have their heads on pikes as a message to future leadership. But this is California, so their policies can only fail. If we're criticizing blue state governments for their catastrophic economic policies, the cancerous woke policies, and the relentless assault on liberty in their states, we don't need such devastation to get started. So I don't want to focus on the impotent female firefighters or other such logical outcomes of forced diversity and inclusion. Let's focus instead on the individuals who just lost everything. Sympathy, of course, but there's plenty of useless sympathy flying around social media, so we'll take as a given that this analysis is for lessons we can learn without minimizing ongoingsuffering.

We often ask what is the value of a large nest egg if a single event, like a lawsuit where you are found at fault in an auto accident, could wipe it all away. What good is a decade of maxing out the tax-qualified plan buckets if you haven't put guarantees and protection in place to ensure it survives first contact with an unforeseen event, like losing one's entire home in an instant? California capped the premiums that insurers could charge, so it become impossible to continue business in the state. When that hole appeared in their financial bucket in 2024, how many people did not address it who now wish they had?

There are many people who bought term and invested the difference (or so they said), who were part of the 99% of term policyholders who outlived the coverage, and considered themselves 'self-insured' based on the balance in their brokerage accounts. And now they have a pile of investments and a burned down house. They won't get a dime for the ash on their lot because they did not have fire coverage, and that nest egg can only move from one pocket to the other, it cannot replenish the value of the home. If they rebuild the house, because they were self-insured, they must liquidate equities to do so. But without insurance coverage in force, the loss their net worth sustained remains without them being made whole.

Self-insurance is a fallacy. Buy term and invest the difference is a short-sighted, JV-level strategy. Have you thought about what would happen to your family if you died today? You get to make no changes, you simply don't wake up tomorrow. How much of your income would be replaced, and how many of your assets would be protected? Now if you could do something about it today, how much of that income would you like to be replaced when you don't wake up tomorrow? How many of your assets would you like your family to have without having to liquidate to sustain their lifestyle? If the answer is not 100% of them, you would probably be well-served by another few boosters.

If we could ask those homeowners in Pacific Palisades if they could go back just one month and let them get a do-over on their home insurance, how many do you think would opt to be self-insured? If you knew that the house that is your life was going to burn down with certainty in the future, that the car that is your life will without a doubt be totaled, how much protection do you want? We are fortunate to be able to make these decisions now before our house burns down, before our car is totaled, before we don't wake up one day. Let's not allow the lessons of those suffering the logical conclusion of poor financial strategy to pass us by without taking action.