5 Steps To Building Your Financial Foundation

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financial foundation

When a building is constructed it needs a strong foundation to withstand the test of time and the environment around it.   The same holds true for your finances.

If you are to financially withstand the test of time, you need a strong financial foundation.  If your financial foundation is weak, it will crumble.

Everyone’s financial circumstances are different; so some of the steps outlined below may apply to your personal situation and some may not.  To evaluate your personal financial foundation you should review your life insurance, retirement investments, disability and health insurance and annuities.

Another factor that will help to stabilize your financial foundation are your credit scores.  Take the steps to improve credit score. The financial world evaluates you based on your credit rating; so do your very best to keep your credit score above 750 and as close to 800 as you possibly can.   Understand that improving your credit score goes a long way towards building your financial foundation.

Building Your Financial Foundation

Step #1 – Buy Life Insurance

  • The first layer of your financial foundation is life insurance.
  • Life insurance is your first layer because it works if you live or die.
  • If you die, the life insurance will help your loved ones.
  • If you live, any cash value built up within the policy can be used to supplement your retirement.
  • When you get your life insurance quotes, the premiums will vary depending upon your age, your health and the face value of the policy.

Step #2 – Build Up Your Retirement Investments

  • For your financial foundation to survive long-term, you must build up your retirement investments.
  • Social security is weak and will most likely not be enough for you to live on once you reach retirement age; so without a strong retirement investment account, your foundation will also be weak.

Step #3 – Consider Annuities

  • Annuities can be a layer within your financial foundation.
  • Annuities are not the proper investment for everyone’s foundation; talk with your financial planner about your personal situation.
  • Annuities can be a variable or a fixed product.
  • The returns in a variable annuity will vary depending upon the market swings.
  • A fixed annuity will pay a fixed rate of return.
  • Again, work closely with your financial planner on what is best for you.

Step #4 – Look Into Disability Insurance

  • You can buy disability insurance on your own or get it through your employer.
  • It can be short-term or long-term disability insurance.
  • Long term starts when your short-term stops. Long term disability insurance pays a percentage of your salary for 2 – 5 years or until you reach age 65.

Step #5 – Review Your Health Insurance

  • A discount health insurance company could offer you lower premiums if you do not get health insurance through work.
  • Discount health insurance is offered through a network of insurance providers; which is what helps keep your premiums down.

We get so wrapped up our day-to-day activities that we sometimes forget to step back and review the basics.   Your financial foundation needs to be strong for you to financially withstand the test of time, so take some time today to review your foundation.

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