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How to Secure Your Family’s Financial Future

Jul 13, 2023

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If you love and want to provide for your family, it's important to think about their financial future, and how that future might change if you were suddenly out of the picture. Getting a good job, budgeting, and saving money can help you establish a brighter financial future, but what other steps should you take to provide financial protection to your loved ones?

Estate Planning

First, you’ll need to think about estate planning. Through estate planning, you'll be able to decide how you want to manage the end of your life, how you want your assets to be split, and how to best manage your wealth to minimize taxes and other expenses. If you work with an estate lawyer, they can help you understand the best strategies for planning your estate, guide you in drafting your paperwork, and ultimately come up with a plan to make things easy on your family if and when you die.

Many people falsely assume that estate planning is only for the rich. On the contrary, almost anyone can benefit from estate planning, even if they don't have many assets. Estate planning is about enshrining your wishes legally, including designating power of attorney – not just protecting or dividing up your assets.

Wealth Accumulation

Accumulating wealth is another way to secure your family's financial future. Regardless of how long you live or how your family dynamics change in the future, having access to more money means greater financial stability.

Together, these strategies can help anyone accumulate wealth over time:

  • Revenue streams. Your first goal should be creating more revenue streams and increasing those revenue streams. Depending on your career and your personal goals, that could mean making a career switch, fighting for more promotions, improving your skill set to earn raises, or taking on additional jobs or gigs when possible. Certain types of investments can also generate revenue, such as rental properties or dividend stocks.

  • Budgeting. Appropriate budgeting is also crucial for accumulating wealth. No matter how much money you make, if you spend it all when you get it, you won't have any to save or invest. Conversely, even if you're not making much money, as long as you live below your means, you'll always end up with extra at the end of the month.

  • Investment. What do you do with the extra money? You can start by paying down your bad debts. But once your debts are covered, you can funnel all the extra money into investments with a high likelihood of paying off in the future. Stocks, bonds, index funds, mutual funds, real estate, and commodities are all options worth considering (and there are plenty of alternative investments to research as well).

  • Diversification. Finally, you’ll need to think about diversification. You may have a great career and an impressive performance in your stock portfolio, but you're going to bear disproportionate risk unless you practice active diversification. In other words, you should have income and investments from/in many different sources, balancing out the strengths and weaknesses of each of those sources.


Insurance

As an added layer of security, you can invest in a life insurance policy. This type of policy typically provides your family with benefits if you die prematurely. There are many different types of life insurance policy.

For example, term life insurance is usually a lower-cost policy that covers you for a specific interval of time, such as 5, 10, 15, 20, 25, or 30 years. People often choose this policy only for their prime working years, wanting it to replace their income if they die during this period.

Whole life insurance is more expensive and is quite straightforward, lasting the rest of your life (in many cases). Your premiums should stay the same – and your death benefits won’t change. Universal life insurance policies are similar, but more flexible, allowing you to adjust based on your future needs. Variable life insurance is a type of policy tied to investment accounts, with potential gains (and potential volatility). And burial life insurance is designed to exclusively pay for end-of-life costs like burial, a funeral, and outstanding medical bills.

Some people may also benefit from purchasing short-term and/or long-term disability insurance, protecting the policyholder and their family in the event the policyholder is out of work due to an accident or disability.

Education

Before leaving substantial wealth to your family, it's a good idea to educate them on the basics of personal finance, so they can use and manage your wealth appropriately.

  • Independent living. Make sure your family members are equipped to live an independent life without your earnings or guidance.

  • Living below your means. Imbue the philosophy of “living below your means,” encouraging your family members to adopt a lifestyle well within their purchasing power.

  • The 4 percent rule. With adequate investments, you can safely withdraw up to 4 percent of your principal annually, indefinitely.

  • Investing strategies. Different assets have different pros and cons – and diversification can shield you from almost any conceivable risk.


There's no single, right way to approach long term financial planning or family protection. What's important is that you have a clear understanding of your own goals and motivations, and that you work with a professional who can help you achieve your goals. If this is something you've been procrastinating, there's no better time than now to get started.

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