Protect Your Financial Life
/Protection can have various meanings in the financial industry, and there are several ways to safeguard your income, family, and financial future. While this isn’t an exhaustive list of strategies, it outlines some crucial topics to help you establish proper protection across all facets of your life.
Protect Your Income
Money Management
Knowing your monthly cash flow is one of the most important aspects of protecting your income. This knowledge allows you to be intentional with your spending. Additionally, having an emergency fund will enable you to be proactive when unexpected expenses arise, keeping you on track instead of starting over.
Life Insurance
I typically recommend that most people have a term life insurance policy. Those who are married and, even more importantly, have kids can leverage an inexpensive term life policy as protection against unforeseen events. These policies range from 10 to 30 years and help bridge the gap while dependents are in the house, giving you added peace of mind.
Disability Insurance
Disability insurance isn't for everyone, but it is worth considering. Many employers offer it for free or at a low cost. This can be a great way to protect your income in case of bodily injury. You will first need to assess your ability to find work in the event of disability. From there, you need to weigh the cost of disability insurance against your confidence in finding other work.
Protect Your Family
Health Insurance
Health insurance is essential, but choosing the proper plan is where the cost savings come into play. It is crucial to analyze all plans that you qualify for and understand which plan will offer the most significant value based on your family's needs. When open enrollment or a qualifying life event comes around, analyze your coverage and select the right plan for the following year.
Estate Planning
Estate planning primarily refers to having a will or trust in place. This helps to protect your accumulated assets for your family. While estate planning can be complicated for some, working with a good estate planning attorney can help you figure out the best path forward. For those with children, the estate plan becomes increasingly more critical.
Lifestyle Creep
Establishing family priorities can be an essential way to protect from income loss due to lifestyle creep. Lifestyle creep means that your lifestyle costs increase along with your income. Once established, this is more challenging to reverse. It often presents as a higher mortgage or a more expensive car payment. Establishing family priorities can be the key to preventing lost income due to lifestyle creep.
Protect Your Future
Calculated Risk
Protecting your financial picture involves not only your current financial situation but also your future. Investing is a crucial piece of your financial puzzle, but it must be calculated and intentional. I elaborate on this topic in my article, “A Beginner’s Guide to Investing.” If you are unsure how to be intentional about your investing, reach out to a fiduciary financial advisor, like myself, for assistance.
Don’t Leave Money On the Table
This can present in two primary ways. The first was already discussed and is your company's free or extremely low-cost insurance options. These are great programs, so take advantage of them when you can. The other way I see this often happening is by not getting the employer match on a retirement plan. Most employers will offer a match of 3% or more, which is essentially free money. Don’t miss out on these great employee benefits.
Tax Planning
Tax planning should be encompassed in multiple areas of your financial plan. You should optimize your tax efficiency through your withholdings, deductions, and investments. To do this, connect with your financial advisor and CPA to achieve the best outcome in all aspects of tax planning.
References
https://www.guardianlife.com/insurance/income-protection-strategies
https://www.investopedia.com/articles/younginvestors/08/generation-y.asp
Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.