Building a Financial Strategy That Will Endure Like the Pyramids
What's the key to a financial strategy built to last? The pyramids of Giza have stood the test of time, enduring centuries of wind, sand, and human activity. These ancient structures were engineered with precision and attention to detail, designed to last for generations.
Similarly, your financial strategy should be built with the same level of care and thought, so that it too can withstand the unpredictable nature of the financial markets.
When we think of the pyramids, we marvel at their majesty and durability. But how were they built to last for thousands of years? The answer lies in the pyramid's construction, which used a solid foundation and precise engineering to create a stable structure. Just like the pyramids, your financial plan needs a solid foundation to withstand the ups and downs of the markets.
To create a stable financial strategy, you need to understand the different types of assets you own. There are two types of money: “Green Money” and “Red Money.” Green Money represents assets with guaranteed values and growth, providing the foundation of your financial plan. On the other hand, Red Money represents assets that can have variable returns, including stocks, bonds, and other investments that lack guarantees.
Both types of assets serve a purpose, but it is crucial to maintain a balanced allocation between them. To create a financial strategy that will stand the test of time, you need to consider four key areas: income planning, asset allocation, tax planning, and legacy planning.
Start by ensuring your income is sufficient to maintain your standard of living now and in the future, including unexpected expenses, inflation and increased healthcare costs. After designing your income plan, align your assets with your risk tolerance and growth expectations. You may need to choose investments that have different liquidity, risk and return characteristics.
Minimizing the effect of taxes can be accomplished through various strategies, including identifying missed deductions and preparing for future tax-saving opportunities. It's important to look at your long-term tax burdens, especially with regard to 401(k)s, which can often be a significant tax liability. For many, a Roth IRA conversion might be part of a holistic tax strategy. Working with a financial professional who can help you navigate complex tax laws and make strategic decisions can be invaluable in minimizing your tax burden.
As you build your financial strategy, it's important to consider its value and tax implications for future generations. A professional can help lay the the groundwork for turning your financial goals into a legacy for your children, grandchildren, or a charity.
Your financial strategy is a starting point, not an endpoint. It should be a living document that adapts and changes as your financial needs evolve. A financial professional can provide guidance and support every step of the way, helping you build your financial pyramid block by block. By constructing a solid financial foundation, just like the ancient pyramids, you can create a financial strategy that will endure for generations to come.
Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance.
She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help their clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones with less tax burden, planning makes the difference.
Her new book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.