If you’re like most people, finances are a major point of stress in an otherwise happy life. According to CNN, some 71% of Americans feel stressed by financial issues. At the risk of trivializing the importance of money in day-to-day life, most financial worries can be alleviated with effective short- and long-term planning. Keep reading as we explore a few strategies for building wealth and creating financial peace of mind.
Understand Life Insurance
If you have any type of social media account, you have likely been DMed by a stranger telling you that you are the perfect fit for their business of self-starters who are motivated to be their own boss.
What it usually boils down to is that they are part of an essential oils pyramid scheme–or a life insurance rep.
Don’t get it wrong–life insurance is a very important component of a comprehensive financial plan.
However, too many people have the wrong kinds or the wrong amounts of life insurance coverage.
Reps will inundate you with a variety of industry jargon, such as term, whole, variable, and universal life insurance. In addition to death benefits, many of these life insurance products will purport to be investment vehicles, offering guaranteed rates of return over time. In some cases, the true benefits of these claims are specious.
In general, it is best to keep life insurance as simple as possible. Use it for what it is intended for–insurance against loss of life. A term policy that will replace your income, pay down your debts/mortgage, and fund your children’s education is advisable. Leave savings and investment to savings and investment–not life insurance–accounts.
Be Real on Homeownership
There is a lot of common knowledge tossed around about the power of real estate as the most failsafe financial asset.
On one hand, it is definitely true that real estate investment is attractive. Unless you are a believer in Bitcoin’s foundational mantra, land is the only truly finite asset in the world. As competition for this scarce resource increases in a growing population, it only stands to reason that prices will increase over time. And for the majority of real estate investors in the majority of markets, their real estate holdings have steadily increased throughout the decades.
On the other hand, too many people look at the high appraisal value of their home and consider themselves wealthy. They can easily become sucked into thinking that their home equity will protect them in case of an emergency or sustain them throughout retirement.
Remember that real estate is a very illiquid asset. Unless you are in the property management game and are able to profitability achieve ongoing rents for your holdings or are a professional house flipper, short-term value in your home is limited to borrowing against its equity. And even when looking long-term, unless you are willing to downsize or move to a cheaper market, it can be difficult to realize the lump-sum wealth your home’s appraisal value may indicate.
While owning a home offers many benefits and is definitely a great investment for more intangible reasons not listed here, never forget that it is just one piece of your total financial fortress and not the golden ticket into the company of the wealthy.
Protect Your Assets from Liability
It’s just a fact of life. As your wealth grows, more and more people are going to be lining up for their slice of the pie. And it’s not just non-profits and humanitarian organizations asking for your generous contributions. Too many people have seen their financial legacy wiped away in court.
Therefore, take comprehensive measures to ensure that your assets are used and distributed as intended and not lost to the legal system.
If you own a business, be sure to have it formed as a limited liability company (LLC). This guarantees that your personal wealth is protected from creditors and legal action taken against your business. Check to see if your state will allow inclusion of the LLC as part of a dapt trust (domestic asset protection trust). This unique asset protection tool helps keep your business and personal assets safe from creditors, as it is a form of irrevocable trust that is immune to your personal liability. In some cases, the grantor of the dapt trust can also be named a beneficiary, receiving discretionary distributions from the trust on an ongoing basis.
Standard estate planning documents are also crucial. This guarantees that your assets are passed on as intended when you are no longer around. A last will and testament, living and irrevocable trusts, advance directives, and guardianship designations are just a few important asset protection documents to consider for your portfolio.
Finally, even though it’s nobody’s favorite topic to discuss, a prenuptial agreement needs to be on the radar of anyone entering marriage. Although everyone promises that their divorce will be amicable (should it ever come about), this is rarely the case. Too many lives have been turned upside-down and financial legacies ruined due to messy divorce proceedings. If your significant other truly loves you, they will understand the importance this document can play in everyone’s ongoing happiness.
Sleep Easy at Night with Comprehensive Financial Planning
With the proper planning, financial freedom can dominate day-to-day stress regarding money matters. If you are looking to achieve financial peace of mind but don’t know where to start, contact an asset protection attorney today and leave your financial worries in the past!
