Lesson 1 - Financial Planning - Part 10

Building Blocks of Success

Building-Block Approach

The most important aspect in anyone’s Financial Success is planning and setting our Priorities (Goals).  Throughout our lives most of us will always experience opportunities and risks, we need to put them in perspective as our life unfolds.  For example you have a small family and are working towards your goals.  You hear an advertisement that says you can double or triple your investment with them in as little as 12 months.  Though this deal sounds great, we still must weigh the opportunities and the risks.  The Risk being the heavier of the two options.  If the deal fails and you lose your money, you might have to give up one of your goals or delay it until later in life.

The Opportunity here is that you will get to achieve the same goal but sooner if it works.  Often any Financial Professional would tell you not to risk losing one of your goals or have to delay it for such a risky idea.

Structures

After you have made some financial Goals, you will have to invest money in most cases to help you achieve those goals. We need to set up a Foundation on which we can build a strong support. The foundation Goals are the most important and these Goals should have the least amount of risk taken to ensure they are adequately achieved. Examples of Foundation Goals could be; A stable Career, Housing, Retirement and Insurance.

The illustration below shows you the foundation goals and different Risk levels.

Advancing from the bottom risk level to the second risk level should only be done when we have a suitable level of safe investment. We do this so if a risky investment fails, it will not cause a huge impact to the foundation Goals. For Example, someone who has a stable career, housing, adequate insurance, and their determined amount of money put into savings might have some extra money left over at the end of the year. Since all of their foundation goals are adequately met, this person chooses to invest the money in a little more risky investment (the next level up). If the investment fails, it will not affect their career, housing, insurance, or savings.