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Three Components of a Good Financial Plan

It is widely accepted that everyone needs a sound financial plan to achieve financial success and security. The deeper question is what’s entailed in securing a workable plan?

Reason Number 1: Cost Savings
Since policies are infrequently assessed, it is not universally known that the cost of insurance has significantly declined in recent years. According to the nonprofit Life and Health Insurance Foundation, the cost of basic term life insurance has decreased by nearly 50% over the past decade. This means replacement policies for some individuals is a smart idea. Other premium costs have gone down as well and for those who need more coverage because of changed circumstances, it is now possible to get better coverage with better benefits at the same cost of policies written several years ago.

A financial plan, like other good planning, provides a roadmap for success, in this case, to meet your financial objectives. Goals such as a comfortable lifestyle, educational aspirations for you and your children, a sufficient nest egg for retirement and perhaps an inheritance for the ones you love. So how do you achieve your financial goals? This is where a financial plan is essential. There are three aspects to every first-rate financial plan and the key is addressing all three components:

1. Safeguard against financial uncertainty

2. Grow your investment funds

3. Manage your nest egg and estate

You will notice that as part of a financial plan you will need a smart investment strategy but, the terms are not synonymous. In other words you need more than sharp investment decisions. Financial planning is the broader concept and investment strategies are an integral component.

Component #1: Safeguard against financial uncertainty by establishing a safety net.
This is built with liquidity of emergency savings and personal insurance. You definitely want to make sure that in the case of an unanticipated life event such as losing a job, becoming sick, disabled or even meeting an untimely death, you are protected. While it is uncomfortable to think along these lines, it is necessary for planning purposes. Most of us think it will never happen to us, but once we stop and think about our larger social circle, it is readily apparent that there are plenty of unfortunate and tragic examples. This is not anecdotal; the statistics back up what you will find within your own circle of family, friends and acquaintances.

Component #2: Grow your investments funds with smart investment strategies.
This is the component most of us are familiar with - asset accumulation through funding investment vehicles such as stocks, bonds, mutual funds, annuities, 401Ks, pensions, etc. Most financial advisors advocate for diversified investments and an acceptable range of risk. Hopefully the decisions you make as part of this component of the plan will meet your financial aspirations and goals.

Component #3: Managing your nest egg and estate.
This aspect of the plan comes into play once you have met your investment goals and you are ready to protect your assets in life and in death. In order to accomplish this, most of us need to turn to advisors who have a broad expertise in not only retirement planning but also longevity and estate planning.

At Asset MarketPlace our approach is to work within the context of your overall financial plan. Contact us for secure and competitively-priced personal insurance solutions.