Stage 2 Protect Your Future

The next step to creating your financial track is to protect your future. There are four fundamental ways to do this:

1. Set up an emergency fund

2. Purchase a home

3. Obtain adequate insurance

4. Create an estate plan

The first thing to do to protect your future is to save three to six months of living expenses for an emergency fund. You need a safety net so that no matter what happens you have options. Expect this reserve amount to go up as your net worth goes up.

Next, purchase a home. This not only is forced savings, it also secures the one asset that determines your lifestyle more than any other. As with any other purchase, buy on the basis of needs first and wants second. Buy what you think you can afford, not what a lender will lend you. Buy with your family's plans in mind. Don't "underbuy," necessitating a move too soon, or "overbuy," anticipating more income in the future. It's a tight line to walk, but you must walk it. If you do "underbuy," you probably will end up making this your first rental property. "Overbuy" and it might put you in the poorhouse. Don't become "house rich and income poor." The real key to freedom here lies in putting your payments on a fast path to owning your home free and clear. (Some might disagree with this advice, but as a real estate professional who has seen both sides of this argument, I say do it. Two extra payments a year on a 30-year mortgage pays off your home in 20 years! Do the math.)

Third, protect your future by insuring it in key areas. You will need adequate disability insurance to protect a minimum lifestyle. You will need adequate life insurance to help support your family and pay any estate taxes. You will need the best affordable health insurance for you and your family. You will need adequate replacement value and liability insurance for your home, car, and personal property. If you get your insurance agent, accountant, and estate planning attorney together, you should be able to figure all this out in about an hour.

Finally, create an estate plan. It must include simple but carefully considered entity planning, appropriate trusts and wills, and strategies to minimize or eliminate inheritance taxes and maximize creditor protection. The investment you make early on for the services of an excellent estate planning attorney will in the end make you money. When Sam Walton was a young man just starting out in business and could least afford it, he set up his estate plan. As a result, at the end of his life one of the greatest personal fortunes ever amassed was transferred to his heirs with little to no taxes paid. Millionaires get this, and so should you.

Thinking Big and Getting Rich

Thinking Big and Getting Rich

From rags to riches – it happens more often than you might think. In fact, it could be you! Are you content with life as it is or do you find yourself dreaming your way to riches? If you answered yes, then you are definitely on the right track because without your imagination – without dreaming – you are not going to get there.

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