When people get serious about their finances—hopefully, sooner rather than later—they often want to know what parts of their financial portfolio to make a priority. Though individual circumstances will vary, the following are some basic rules.
Insurance — Once you own property of any value or live on your own—even if you rent—you need both property and liability insurance to protect yourself from a large financial loss from things such as fire, accidents or being held liable for injury to others or damage to their property.
You will also need health insurance, and you should consider disability insurance, especially if you are self-employed. It will supplement your income if you cannot work.
Life insurance becomes very important when you have a family who depends on your income or the care you provide. It is equally as important for mothers and fathers and should be a priority purchase.
Emergency Fund — Experts agree that people should have savings to cover at least three months of normal costs in case of a short-term loss of income. This definitely requires sacrifice, but it is an investment worth making since that fund could be key to paying critical bills.
Retirement — Begin retirement saving, if you haven’t already, even if you sock away just a little each week. As your income increases, consider an annuity—a type of investment that pays out a dividend monthly, beginning at a predetermined age. Your financial professional can advise you on which options are right for your situation and goals.
As with all purchase decisions, there are trade-offs. You may have to live simply when you first start out so you can live comfortably when you are older. Talk with your insurance advisor about building financial protection and a long-term wealth plan. It is never too early to start—and, luckily, never too late!
