Financial Planning Pyramid - Stage 1

Got background in different kinds of investment but actually confused on each of them? Don't fret. You are not alone! It takes lots of reading to tackle everything, I swear. In this blog series, I will summarize this whole financial planning thing you're always hearing and discuss each for you.

This is a Financial Planning Pyramid. As a Financial Coach, my ultimate goal is to let my clients understand the value of protecting, building, and preserving their hard-earned income or their wealth.

It may sound too technical for some, but this is one of your tool or checklist for a sound Financial Plan. Don't be too overwhelmed. You don't have to accomplish all of these in 1 week, 1 month, or even 1 year! This checklist is a journey. This is a journey towards your respective financial goals and I would be glad to be with you through out your financial journey as your Financial Coach.

So let's take it stage by stage.

STAGE 1: WEALTH PROTECTION

In building a house, you need a strong foundation to make your structure secured and safe, right?

Same in building your financial plan, you need to have a strong foundation. What are these?

1. Emergency fund

- How established your emergency fund is? Do you have an emergency fund?

Emergency fund is minimum 3 months' worth of your monthly income. You may ask, "Is this necessary?" Remember, it is your financial plan's foundation we are building. We appreciate more this emergency fund during crisis. For example what we are experiencing today with the COVID-19 crisis. Did we even expect this to happen? No. Some Filipinos are blessed to be employed in a company where their income is continuous even in this period, but with most Filipinos who are on a no-work-no-pay basis, they have a problem. An emergency fund will cover you against temporary loss of job or calamities that may arise. How to build you emergency fund? It will be tackled on my upcoming posts.

2. Savings

- Isn't this the same as emergency fund? To firmly establish your foundation, allocate a portion of your income to your savings. Some of you may say, "I have a savings account," which is good and commendable. But most would keep their monthly sweldo/sahod either in cash or in their payroll account. What's the negative effect of doing this? Read further by clicking this link.

3. Health Protection

- Do you know a close relative who suffered from illnesses such as stroke, cancer, hypertension, diabetes? My guess is that you answered, YES! This just proves that we are all at risk in such illnesses as well. But the good news is that we can, first, prevent this to happen by maintaining a healthy lifestyle with exercise and right kind of food. We all know that, but it takes disciple to actually do it right??! Second is we can get health protection such as Health Maintenance Organization (HMO) so you are covered for consultations, hospitalizations, confinement and even, for some, dental coverages!

4. Life Insurance

- Did you know that there are only around 16% middle to upper income Filipinos who actually own a life insurance? Why is this so? 3 reasons. 1) Filipinos still have a traditional midnset. They'd rather shell out hundred thousands or millions of out-of-pocket expenses in cases of sickness and death of a family member rather than go for a lump sum cash benefits these life insurance companies give upon critical illnesses, accidents, or deaths. 2) Filipinos have short-term time horizon. We tend to blur the realities of life and don't have foresight of what could happen. 3) Life insurance is still viewed as an expense rather than an asset. It's embedded in our culture, I guess. Talking about insurance is a taboo for some. But look at the first world countries such as Australia and Canada. Everyone's prioritizing their insurance. It's all about mindset and choosing the right insurance company and trusted Financial Advisor for you and your family. Life insurance can give you more than you can imagine. Research for it or talk to an Advisor. :)

Now we looked at the solutions for Stage 1, Wealth Protection. This is simply to give your financial plan a sturdy foundation against uncertainties of life. This is to protect you from events we do not have control with.

My challenge for you is, are you willing to build your foundation for you and your family?

#HelpingYourLifeBloom

In need of financial coaching? Contact Coach Daisy Banaag here.