The missing link in financial planning

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The missing link in financial planning

Creating an investment portfolio with the potential to build some genuine financial independence can be a stimulating journey, but your personal insurance must be part of your strategy.

The idea of creating financial independence and a comfortable lifestyle through a successful investment portfolio is a compelling one. The missing link in many financial plans, however, is a contingency strategy that will help you protect the lifestyle you have now and the financial freedom you are trying to build for the future. Most importantly, a solid risk strategy is essential for helping to protect the welfare of those closest to you.

The self-completing financial plan

When you start creating a financial plan the fundamental first step is to be clear about your goals. The lifestyle you want to enjoy, the places you want to go and the things you want to own. These goals are what gives your plan direction and motivates you to take the steps to get there.

The fundamental purpose of a risk protection strategy is to make sure that your plan is instantly self-completing if the income that feeds your financial plan is suddenly cut off. In other words, if your ability to fund your investment strategy is taken away by a temporary or permanent illness or injury, then you still have the independent resources to fund your goals using a combination of the right types of personal insurances.

Setting up your risk contingency strategy

In the same way that you set up an investment strategy by defining financial goals and quantifying the money you need to achieve them, your insurance planning also needs to be based goals for the lifestyle you want for you and your family if the worst happens. The home you want to live in, the lifestyle items you want to own, the ongoing income you want to ensure a comfortable life and the experiences you want your family to enjoy.

Once the dollar amounts are identified you can then create an insurance strategy that may include a combination of:

  • life cover that will pay a lump sum on premature death or terminal illness
  • total and permanent disability cover that will pay a lump sum if an injury or illness permanently prevents you from working again
  • trauma insurance that pays a lump sum upon diagnosis of a range of major medical conditions, and
  • income protection that pays an ongoing monthly income for short or long term periods of illness or injury.

Integrating into your financial plan

When setting up a financial plan and deciding on what savings allocations you will be making toward your financial growth, for a lot of people it simply makes good sense to have a proportion of that amount diverted toward funding your insurance strategy. The investment and insurance components will go hand in hand to create an integrated plan that helps ensure your goals are achieved.

Your adviser has the skills and research capabilities to assess your insurance needs and recommend the most effective and economical options to put your plan into practice.

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