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Once Bitten, Twice Shy: The Financial Cost of Personal Safety

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Last weekend, my daughter and I reviewed her budget. It’s an inevitable task when your mom’s a financial planner, and I’d been nagging her about it for weeks. “I’m not having that great of a weekend,” she said. “So let’s do the money thing.” Her cash inflow, like I think most of the rest of the world’s except maybe Bill Gates or John the Baptist, is not as high as she’d like it to be, so looking at her finances is as depressing for her as it is for me and you. Plus, she’s trying to live the millennial dream in NYC!

 As we dragged our way through the spreadsheet and she looked for places to reduce spending, I pointed out that a good chunk of her dollars went to keeping herself safe. To avoid crime and stay safe, she pays higher rent to be in a safer neighborhood, takes taxis or an Uber when it’s unsafe to walk, upgrades apartment locks, etc. In my opinion, being safe is an essential part of a good-quality life and is worth paying for. What are the costs of personal safety and are they worth it?

 Where You Live

It costs more to live in a “better” neighborhood. How is “better” defined? It includes highly ranked schools, well-kept up homes and lawns, a desirable location, and more expensive houses. It also means increased safety for yourself and your belongings. When you rent or buy a place to live, you want to look up local crime statistics, check the quality of the schools even if you don’t have kids, and pay attention to traffic patterns before you commit. These actions will increase your safety. It’s hard to quantify the premium you might pay to live in a safer place in a particular town or city, but I’ll use a 15% increase over the national median for monthly apartment rent of $1,200 (from Ilyce Glink of CBS) as an estimate for the extra you might pay for safety.

Annual safe neighborhood premium – $2,200

 Transportation

Most Americans get around in a car that they own and maintain. This Nerdwallet article by Jeannie Lee discusses the basic costs of car ownership, which include the actual purchase and the car payments that go with it, maintenance and repair costs, gas, property and registration taxes, and parking fees. Having a reliable car is imperative for safety because if your vehicle dies on the road, you risk being a victim of crime. Although most people are kind and helpful and will give you a lift or help you change a tire, you don’t want to put yourself in a vulnerable position because you didn’t spend the money for a safe car. Additionally, you’ll pay more for safer parking spots – ones with lights, security, shorter walking distances to your destination, and better locations.

 If you live in a city and rely on public transportation, you’ll want to take safety into account, especially at night or during non-peak times. The NYC subway seems pretty safe at rush hour; at 2 am it can be scary. Same with New York streets: when visiting there, I always feel safe walking home alone from my daughter’s work at 5 pm. However, once when I walked back alone to her Lower East Side apartment from a late night jazz show that went too long for this early-to-bed mom, I found myself first walking fast then actually running full-out to her front door. I encourage my daughter to take taxis or car services late at night, and those options cost more than the subway or walking.

Car ownership – $9,000 per year; safe car “premium” – $2,000; additional public transportation cost assuming 40 late nights a year – $800

 Home Security System

Another way to keep yourself safe in your home is to install a home security system and to use it every day. Paul Sullivan, writing for the NYTimes, confirms that “when so-called smash-and-grab thieves do strike a home with an alarm system, they are more likely to leave quickly.” Alarm systems also provide other types of alerts like smoke from a newly started fire or unlocked windows. However, every security expert I consulted pointed out the ineffectiveness of installing and paying for a system that you don’t take the time to turn on. A basic security system with active monitoring will cost you between $600 and $1,200 to purchase and about $30 per month to maintain. Security systems can go a long way toward protecting your personal safety and preventing or reducing the severity of a burglary.

Security system (installation cost plus monthly payments of $30) – $960

 Having Fun

Safety can be an important factor in the fun you have. If you love high-risk activities like sky-diving, skateboarding, motocross, or horseback riding, you are aware of the risks you take with your safety but accept them because you love the sport. Even seemingly innocuous activities like going to Disneyworld (alligator death) or a local lake (death from infectious amoeba) carry safety risks. Going out to bars or parties at night, which is expensive in itself as Libby Kanepoints out, increases your chances of being involved in an accident, DUI, or shooting. Commuting to work or play on a bike carries the risk of accident.

 Just because life carries risk, however, doesn’t mean you don’t want to live it fully. To mitigate risk associated with having fun, you want to:

  • Make sure that the enjoyment you get from the activity outweighs the risks

  • Be as careful and aware as possible, being sure to follow basic safety rules for that activity

  • Avoid being alone in compromising situations if you are drunk or in an otherwise altered state.

 It’s hard to quantify additional safety costs with regard to entertainment, but let’s assume that going out at night means spending more on safe transportation home (going out 40 times a year with an Uber cost of $20 each night) and engaging in risky sports means the risk of medical expenses from a bike crash or knocked-out tooth ($2,000).

Entertainment safety assuming one minor accident and going out 40 nights a year – $2,800

 Physical Fitness

One of the most important ways you can keep yourself safe is by being as physically fit as you can manage to be in your current personal situation. You can do that by walking regularly or by joining a gym. Being in shape helps you become more aware of potentially unsafe situations and to have the energy and ability to extricate yourself from them quickly. The results of being fit are hard to quantify in dollars, but intuitively they make great sense. Most security experts say that confidence and situational awareness (see Peter Shankmans’ great article on how to avoid being a crime victim) are two important traits for being safer and avoiding crime; exercise enhances both of these.

Gym membership – $480/year

 Insurance

Insurance is one of the most common and best ways to minimize the financial impact of danger to your health and your property. It’s the most expensive safety cost most of us incur. Health, auto, homeowner’s, renter’s, and liability insurance will protect your wallet when bad things happen to you or your stuff. Health insurance protects you from crippling medical bills if you have an accident or serious illness. Auto and homeowner’s insurance reduce potential property losses and provide liability coverage. Kimberly Palmer, writing for USNews, discusses the importance of homeowners insurance, which, like auto insurance, protects both the tangible property and problems that can occur in it to the inhabitants and their guests. If you’re renting, renter’s insurance is a cheap, useful way to safeguard your possessions if something happens. As Larry Light, Forbes contributor writes, “insuring for all the what-ifs in life can be confusing, time consuming and expensive,” but ignoring safety can be financially devastating.

Estimated annual insurance costs for health ($6000), auto ($1,000), homeowner’s ($1,000), and renters ($100) insurance – $8,000 for a homeowner; $7,100 for a renter

 Emergency Preparedness

Our recent natural disaster, Hurricane Matthew, ended up weakening from its potential damaging strength, but even so, it cost people, businesses, and governments plenty in evacuation costs and lost business revenue, and it caused an estimated $6 billion in damages. What should you do to be prepared for a weather emergency and how much might it cost? We’re not talking Doomsday Prepper but rather a reasonable and measured prep for an emergency. Ready.govoffers advice on how to get ready for any emergency, listing the basic supplies you would need for the recommended period of 72 hours.

Estimated cost to prepare for one emergency – food, water, flashlights, batteries, gas, etc – $500

 Gun Ownership

Does owning a gun make you safer? I don’t know, and the statistics are inconclusive. This LATimes article says no. This CNN article says sometimes. This CNSNews article says yes. If you want to own a gun, would feel safer having a gun, and are comfortable with shooting a person with that gun to defend yourself, then you should take the training and buy a gun and ammunition to protect yourself. In an essay that I teach each semester in my freshman comp English class, “A Peaceful Woman Explains Why She Carries a Gun,” Linda Hasselstrom writes that in owning a gun “the most important preparation [is] mental: convincing myself that I could actually shoot a person.”

 I live in South Carolina where almost all the men I know (and a few women) deer hunt, own guns, and possess concealed weapons permits. They advocate the importance of gun safety, comprehensive training, and regular practice to be a safe gun owner. Should you decide that gun ownership will make you safer, be sure to comply with all the laws in your state.

Estimated cost for a low-end handgun, ammunition, licenses, and training: $600

 Totaling It Up

So how much does it cost to have a safe year? Of course it depends on your personal circumstances, but if one person followed the all the guidelines here using the lowest cost in the range for an estimate, it would cost $16,640. That’s a lot of money! Is it worth it? I think it is. Before I was a financial planner, I had a 20+ year career in HR and labor relations for the construction industry where companies spend a lot on safety…and pay dearly in fines and penalties when they skimp on safety costs. Individuals who ignore safety concerns and just “hope for the best” also face severe financial risk in medical costs from accidents or crime, loss of assets due to theft or damage, legal costs from DUIs or liability lawsuits, and reduction in productivity from dealing with and worrying about the results of being unsafe.

 What does safety mean to you? Its scope can range from basic safety to hiring an elite personal security team of ex-military commandos. Most people find themselves somewhere in the lower to middle range. Many financial decisions compete for your dollars and time, so you have to figure out what works for you and your specific situation. Take a few minutes to evaluate your personal situation and consider making the changes necessary to keep yourself – and your money – safer.

Originally published on Nov. 8, 2016 HERE.

Written by Kathryn Hauer, “The Financial Lady.”  Kathryn is the co-founder of Wilson David Investment Advisors and is the author of “Financial Advice for Blue Collar America.”  You can find her writings on the Wilson David Blog and her personal blog Financial Advice for Blue Collar America.”

Contact Kathy: Phone: (803) 507-6300; email: [email protected]

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