As children we were told the story of The Three Little Pigs, how they each built a house and the big bad wolf came huffing and puffing. Surely you know that the 3rd little porker was wise enough to build from BRICKS and was the hero, repelling the canines’ sharp teeth.
The principle holds true, even more so in today’s world of uncertainty and lack of corporate loyalty to their labor forces. Back in the day you could count on a “position” at the factory to be secure for 40 years, and sons followed fathers many times in fulfilling those positions. HOWEVER, today’s attitude is that experience and dedication are secondary to profits, and cheap labor is primary.
It is EVERMORE IMPORTANT that your Financial House be solidly built, so I will outline 6 building blocks, the BRICKS, that are tantamount to survival and success in maintaining ones aspirations of true freedom to retire when ready. As all buildings are constructed from the base upward, I will do the same. starting with the foundation and working towards the roof, or the “cap”, so come along…….
- Income Protection— in case of the loss of a wage earner, you must not bear that risk alone, your family cannot survive!! The mortgage, auto loans, and income of that spouse MUST be protected to prevent catastrophic results, carry a TERM LIFE policy with enough benefit to satisfy these needs for the survivors. We will dicuss in detail the comparisons of low yielding cash value policies and full benefit term insurance in future posts.
- Emergency fund, budget, wills—We posted about saving up an emergency fund previously, so lets cover budgets. If your household has NO PLAN for how you allocate your available funds, you will find you suddenly have no “house”, get settled in together and put the “pencil to it”– make a plan. Wills, be sure that the house is securely managed should a bad thing happen, protect your family who survives from even more pain and suffering after the fact.
- Eliminate debt— as posted previously, carry no consumer debt using the “debt stacking” principle and pay off auto loans and mortgages early. As mentioned, then take those same funds each month and invest wisely. Have an advisor with your interests at heart help negotiate this minefield. We will soon discuss a concept called the “Rule of 72” in which investments expand exponentially.
- Retirement–the goal of most of us working stiffs, to be able to “play golf” all day!! BUT, one must be able to pay bills and buy food [and pay the greens fees]– so it will take having put away money in preparation for that day. You must set asi de capital for this each and every month for some time until the figure is attained to sustain that perpetual “golf party”. Now, personally I have zero desire to golf, but sail, fly kites, photograph, go diving…..YEAH!!.. Whatever your idea of the leisure of retirement is, the principle remains the same.
- College tuitions– if you have children who aspire to “higher education” then being able to provide them with the means to get those degrees would be noble and loving. Don’t wait until high school to think about it!!
- Dream world— those long awaited things you talk about together, always saying “when we can afford to…..” Those are motivators to achieve financial freedom to just do what you’ve “always dreamed of” as the cliche’ goes.
Frankly the building of a solid structure is never an easy task. It requires thorough planning in the beginning, solid preparation in advance of EACH step of construction, diligent dedication to quality in implementation, and constant diligence to adherence to the plan until, in fruition, the finished product can be revealed and inhabited.