The Financial Planning Pyramid is a widely accepted and simple tool that can help you create a financial plan built on a solid foundation. It provides a visual representation of the order in which you should address various financial matters. The pyramid consists of the following levels:
1. Debt Reduction: This forms the base of the pyramid and should be addressed first. It involves reducing your debt burden.
2. Insurance Needs: The next level focuses on ensuring you have adequate insurance coverage to protect yourself and your loved ones.
3. Properly Drawn Will: This level emphasizes the importance of having a properly drawn will to ensure your assets are distributed according to your wishes.
4. Emergency Fund: The top level of the pyramid highlights the need for an emergency fund to cover unexpected expenses.
As you move up the pyramid by reducing debt and acquiring assets, your income protection needs are replaced by your need to accumulate more wealth. A Certified Financial Planner can help you make the most of the Financial Planning Pyramid.
Please note that this tool provides general guidance, and it’s always advisable to consult with a financial professional for personalized advice based on your specific circumstances.