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The five Stages of Family Financial Planning |
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When individuals first marry or begin a family, income protection and debt cancellation in the event of death become the first major insurance issues that need to be addressed. During this phase of the family "Circle of Life" the family is typically in the acquisition phase of their relationship. Often this includes the purchase of a home, home furnishings, new motor vehicles, and also preparing or paying for the birth of their child(ren). It's during this phase that the least expensive for of insurance is best, after all, the extra income is focused on acquisitions. Our recommendation for families in this stage is Term Insurance. Term insurance has never been as competitively priced as it is today. Once the family begins to mature, the focus will move from acquisition to thinking of retirement, retirement planning and estate planning. As the circle of life evolves the transition of insurance will flow with it. As couples enter their mid to late thirties is when consideration needs to turn to more permanent types of life insurance, such as Universal Life or Whole Life. Things would certainly be simple of the circle of life evolved easily from one stage to the next, but that just isn't so. Life then would be far to easy. Once the family has addressed the immediate risk factors of the untimely death of a spouse, the family must then consider how to protect the existing income from extinction. In today's medical environment, you are more likely to survive a major life crisis and become permanently or temporarily disabled than you are to die. Please don't take this the wrong way, Life Insurance and Disability Insurance definitely go hand-in-hand, but the needs analysis and considerations should be death with separately. Additionally, many employers provide for a basic disability plan for their workers, while the group life insurance benefit is typically the weaker of the two benefits. For those that are self employed or who do not have access to either type of plan, these considerations must be met early in the life cycle.
One word, COLLEGE. It is typically at this stage that the family really begins to see why early planning was so important. If the first two stages are adequately covered the migration into the savings plan arena is quite easy. During this phase, the family must now begin thinking of investments for the future. Investments to pay for college tuition, retirement, a larger home, or all of the above. It's also an area where sound advise from multiple sources is most needed. For this we typically recommend a combination of considerations. These considerations can and should include: 401K savings, traditional savings, mutual funds, and discussions with your accountant and other financial advisors is worth the investment and time.
The final financial need most families need to satisfy is the retirement and/or estate planning. After all, after many years of providing for your family the circle now evolves to your retirement years and your ability to continue to live well. First on your mind should be is Social Security going to be there for me? The answer most people are assuming is no. We believe to some extent there will be some aspect of government support, however, we shouldn't take that for granted. People are now living longer after retirement than they used to, as a result there is greater demand on the Social Security system. With that said, continued planning from what begun in the previous phase is even more critical in this final phase of the family life cycle. If we've been lucky enough to have worked with you from phase I, we should be well on our way to providing for a secure financial future as you migrate into retirement.
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