Is your financial plan “ puzzle ” missing a piece ?
Many people believe that you need to be wealthy to have a financial plan . The truth is everyone should have one . Many people confuse a product like an IRA or a 401 ( k ) with a comprehensive plan . While these products may represent a significant piece of the puzzle , they are not the whole puzzle . So what does a complete and viable plan look like and what piece of the puzzle should you start with ? Developing a plan requires some thoughtful consideration , beginning with the end in mind . The plan should involve a balance of savings , equities , retirement accounts , life insurance and disability insurance in the early years . Later in life , the plan should also include “ long term care ” coverage , followed by estate planning , which takes into consideration the size and future plans for the estate . The first piece of your financial plan ‘ puzzle ’ should be Life Insurance . Though life insurance is often overlooked as part of a portfolio , no financial plan is complete without it . Life insurance helps insure that a personal tragedy does not become a financial tragedy . It pays the mortgage , buys the groceries , pays college tuitions and allows your family to remain in the world you created together , by replacing lost income . If you have people relying on your income , life insurance is an obligation .
Another piece of your puzzle should be Disability Insurance , which provides replacement income for you and your family should you become injured or sick and are unable to work . Disability not only causes a loss of income to the family , but it also brings with it the added expense for medical care and rehabilitation . Add this to the normal obligations of maintaining a family , and it is possible for even a good-sized estate to disappear rather quickly when prolonged disability occurs in a household . Providing for a replacement income will help lessen the impact caused by a disability . All this begs two questions : How much and what type of insurance do you need and where can you turn for help ?
Just like putting together a puzzle , it can be hard to get started if you don ’ t have a picture to go by . Take the first step and consult with a credentialed financial professional who can help you put together a picture of your complete financial plan .
by Jeffrey M . Orth , CSA , ChFC
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MAY / JUNE 2007 GILROY TODAY