The 9 Rules Of Money You Need To Implement Now

May 5, 2020 | Financial Planning | 0 comments

RULE 1: FULL REPLACEMENT PROTECTION

Unforeseen events can happen at any time.

  • Full replacement value of your assets, income, and life is essential for wealth conservation in the event of a claim.
  • A properly designed protection plan is a higher priority before savings and investments are fully developed.

RULE 2: SAVE AT LEAST 15% OF YOUR EARNED INCOME

Failure to save at least 15% of your income leaves you vulnerable to wealth eroding factors such as:

  • Inflation
  • Taxes
  • Market fluctuations
  • Law changes
  • Law suits
  • Technological change
  • Unexpected life events
  • Fees and consumer financing
  • Increased standard of living
  • Planned obsolescence (wear and tear, style changes, etc.)

RULE 3: BUILD LIQUIDITY

  • Accumulate at least 6 months’ worth of your income
  • This enables you to operate on a cash basis and minimize loan interest and principal payments
  • Liquidity can be a powerful tool when presented with unforeseen events, opportunities, and rising interest rates

RULE 4: AVOID COMPOUNDING TAXABLE INTEREST

  • Compounding interest creates compounding taxation which significantly erodes wealth

RULE 5: CONTRIBUTIONS TO RETIREMENT ACCOUNTS

  • First contribute up to the employer match portion if you have that available through work
  • Contribute no more than half your gross annual savings rate
  • You must consider where future tax brackets might be when you retire – This is why various types of income in retirement make sense

RULE 6: BE A LENDER

  • These financial assets are income-oriented with some guarantees and lower risk.
  • You are lending money to the government, developers, and private investors.

RULE 7: BE AN OWNER

  • You become a shareholder or asset owner
  • Participate in the potential profitability of companies and appreciation of their value

RULE 8: OWN HARD ASSETS

  • These financial assets provide opportunities for income and growth while providing tax benefits.
  • You are an owner of these assets and businesses
  • You may control these assets, enjoy their use, gain tax benefits, receive income streams, and  build capital appreciation

RULE 9:  MAINTAINING, BALANCING AND MONITORING YOUR ECONOMIC MODEL

You’ll need to periodically re-balance your model to adjust for the changing circumstances in your life and the economic world around you.

  • Make each dollar work efficiently
  • Create peace of mind
  • Increase protection against unknown risks
  • Provide greater retirement income
  • Provided greater legacy to heirs
  • Give yourself greater control of your financial destiny
  • Simplify your financial life and decision-making

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