The Three Components of Financial Planning

A financial plan has separate levels and its purpose is to ensure the security/safety and growth of the person. There are three levels in the financial plans. These are the safe and secure plan, the comfortable plan and the rich plan. The meaning and relevance is obvious from the terminologies.

The Safe and secure plan has three components:

Wealth

the safety component
the savings component
the growth component

The safety component consists of the basic car and home insurance, liability umbrella, disability and condition insurance. This also includes life insurance. In case the person has a family, all these should make sure the family is able to do anyone they want to do regardless of whoever dies or gets disabled. The person should focus on strategy and not products. For instance, if a person wants to buy life insurance, he should focus on how he is interacting with the assurance enterprise and things like that, rather than on the product. Roughly all the assurance clubs offer the same products. So, wasting a lot of time selecting in the middle of the separate assurance clubs is not necessary.

The second component in the safe and secure plan is the growth component. This necessitates putting away three to six months of expenses in a very safe and secure account. This is very prominent to ensure that the family will continue to live, if a person stops to earn. A lot of families suffer when the person earning the wage becomes disabled or dies. Retention away money that can cover the family expenses for sometime is the clarification for these problems. Benefits offered by the hiring enterprise should also be looked up. This can take separate forms. Withdrawal plans should also be carefully since we have to reconsider it as a salvage plan. It is a great accumulator of money as there is some discipline in that you can't spend the money.

The third component of the safe and secure financial plan is the growth component. This is where the real wealth gets built. This might start with putting a petite bit of money in stock inventory or mutual funds depending on the financial capacity of the person. This component is also the transition from the safe and secure plan to the comfortable plan.

The Three Components of Financial Planning