Thursday, March 25, 2010

Column or Pyramid?

Most everyone has some sort of a desire to get from point A to B; point A being where they are now financially, and B where they want to go. More often than not B is somewhere above A because usually people who have money and financial success don't desire to lose it. So the average person that enters the world get's out of college and usually their B is retirement. They really aren't sure how to get there, but they know it's up to them, so they find themselves a nice secure job and start contributing to a 401(k) or some similar retirement account. For the majority of people that is the extent of their plan.

It's like to get to point B from point A you must build. Since the average person knows they have to build they build the only way they know how; straight up. When someone is relying entirely on their 401(k)it's like they are building a narrow column. Yes they may gain height very quickly, but the higher they go the less stable the column becomes. Eventually they will not be able to build any higher without the serious risk of collapse. However, many people don't recognize these risks, and if they haven't reached point B they will likely continue to build. Few people with this kind of retirement plan reach point B with the circumstances they had desired.

The older you are the more likely you are to realize that there are many unforeseen events in life. Things happen. Few of us make it through life without a little bad luck. Some of us end up having a lot of bad luck. To prepare for that you have to build right. Start with a solid foundation and well engineered parts. The ancient Egyptians learned that the wider the foundation the taller and stronger they could build. They knew for a fact that the pyramids would not fall down. In fact they built them to last thousands of years.

Everyone starts at a different point A and tries for a different point B. Whatever your point A, a good first step to build a foundation is a 6 month emergency fund. That is enough cash to live off of for 6 months if you lost all other sources of income. Next is some protection. If you use proper life, health, disability, and long-term care insurance you can build an excellent foundation. You will know that no matter what happens to your building you will still be able to take care of yourself and your family.

Unfortunately there are more people selling insurance than I can count, and some of them are not very good. I have a friend that teaches classes to insurance agents and it is very apparent that there are many agents that have been in the industry for years and still are not very familiar with their products. I would recommend meeting with as many agents as you can handle until you find someone that you really like. From there everyone's building is different, just like their end goal. For anyone that will be in the SLC area, I am more than happy to meet with you and talk to you about your Point A and Point B. If outside of the SLC area feel free to email me at I will answer you questions the best I can and if appropriate we can have a webinar.


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