As a Financial Advisor I believe there are seven financial pillars which are fundamental to your financial planning, future wealth creation and wealth preservation. These pillars can be identified as follows:
This provides you with your day-to-day funds and is derived from your employment.
Savings: This is designed to provide for your short and medium terms needs.
Investment: This is fundamental long-term wealth creator.
Property: This could be your home and or investment properties.
Pension: This is your provision for your retirement.
Inheritance: This is typically derived from your family.
Protection: This is a key part of any plan for your wealth creation and management.
So lets walk through the Pillars
We start off by looking at income as the first pillar. Income is a fundamental building block in all of your financial development and it is a key driver for your future wealth. All of the other financial pillars are built from income, and it is income that allows you to lay the foundations for the growth in all other areas of your finances.
It is important therefore to carefully manage and plan your income to ensure that the other pillars can be developed and planned thus building wealth for your future.
If we look at income as an asset in its own right there are some interesting figures that may put the importance of this pillar in to perspective.
If we take a 35-year old earning €40,000 per annum from now until age 65, that person will earn over €2,000,000 during that period.
If you take a 40-year old earning €80,000 between now and age 65, that person would earn over €3,000,000 during that period.
You can see that this represents a substantial asset over your life and in most cases this will be the biggest asset that an individual will ever own. This highlights the need for this to be managed carefully and effectively to achieve financial growth, security and future wealth.
The next pillar that we can identify is savings. Savings are typically created through effective management of your income.
Income provides you with a regular source of funds coming in to the household. Effective management and budgeting of this income is designed to provide you with an excess that can be used to build other pillars.
In this case, the first excess created through careful planning of income, can be used to build savings and provisions for future needs.
Typically, this is done by way of regular contributions into a savings plan. This can be done through a bank deposit type savings plan or through a savings plan that may offer you the potential to invest in other asset classes.
Through investing over a long period of time you can take advantage of the effects of compound interest which will help build a store of wealth that is designed to cover a future need.
Savings is one of the pillars that would provide for your short-term and medium-term goals. It is important …