One reason why financial planning is so important is your family. Whether it ís your spouse, your children, or your parents, it ís imperative that you consider them in all your planning. The best way to plan is to make sure you understand the 3 phases of the wealth cycle and know how to plan for them appropriately. 

The 3 phases in the life cycle of building wealth are: 

  1. Accumulation Phase: Pre-retirement stage where you’re working and accumulating wealth
  2. Distribution Phase: Post-retirement stage when you’re no longer working and living on retirement income
  3. Estate Transfer Phase: After you die and your will and testament is speaking for you 

In addition, you need to understand that when you’re younger and have more financial responsibilities such as student loans repayment, mortgage, and childcare, you have less resources to build wealth. For this reason you are more likely to be financially insecure. Hence, if disaster strikes that leads to disability, critical illness or death, it’s likely that your financial resources are inadequate to continue supporting your family. 

So what do you do to ensure that your family’s lifestyle will not be compromised when life events put a monkey wrench in your financial planning time? You buy insurance that will carry on to take care of your family if you’re unable to. 

The rule of thumb when it comes to insurance is that the younger your family, the more insurance you need. Most people will ensure that their children’s expenses are taken care of up to age 25 or 30. 

When you are older and your financial responsibilities decrease since your student loans would be paid off, your children are older, plus your income likely increases over the years, you’re in a better position to build more wealth and become more financially secure. At this time you will be more self insured if the proper measures are taken where financial planning is concerned. 

The question many ask about this stage is: Do I still need some insurance if I’m financially secured? 

Personally I believe you should still have some insurance to cover your financial expenses at the least, such as funeral costs, probate fees, and final taxes. And of course if you want to leave a large sum of money for your loved ones – not knowing how long you will live for and how much of your retirement savings will remain upon death – insurance is definitely the most effective way to do this because the death benefit is not taxed.  

While your beneficiaries receive all the death benefit from a life insurance tax-free, all your other investments will be subjected to tax upon death! 

However, while you don’t have to leave a large inheritance for your family when you pass, you really don’t want to leave a mess behind. And especially in cases where you may have some debt, or you may want to leave your principal home for them, but that home may not be mortgage-free, you want to have enough insurance to pay off those debts too so that your loved ones are not stalked by creditors or lose the home if they can’t afford to cover those debts. 

And don’t think that stay-at-home parents don’t need life insurance either; many times they need to be covered for more than the working partner because of all the benefits they provide to the family such as childcare, cooking, cleaning and more.  

Before buying life insurance, the first thing you need to do is assess whether you need it or not. Not everyone needs life insurance. If you have adequate savings to cover all your final expenses and keep your family out of poverty, then you may not need life insurance.  

To determine how much life insurance you need, below are some questions that you could ask yourself:

  • How much debt do I have?
  • How much expenses do I have each month?
  • How much income (education, childcare etc.) do my survivors need if I’m gone?
  • How much savings do I have and how much do I earn on my money?
  • How much inflation do I expect? 

All these factors come into play. Let’s look at an example of insurance needs. 

Suppose your family needs an income of about $4000 a month for the next 15 years to maintain the same lifestyle other than that you are gone. How much insurance do you need to provide for that?  

Annual need = $48,000
Total need for 15 years = $48000 x 15 = $720,000  

But do keep in mind that inflation does affect the actual amount needed, so when inflation is factored in, the amount needed each year will increase.   

For instance, let’s assume an inflation rate of 3% on average each year, this is what the need will look like for the first few years to have the same purchasing power of $48,000 each year.  


Amount needed




$48,000 (1.03) = 49,440


$49,440(1.03) = $50,923.20


$50,923.20(1.03) = $52,450.90

This means you’d need to buy a life insurance policy that provides about a $900K payout such that you could easily provide $4000 a month to your family for 15 years after you’re gone.   

And do keep in mind that age and health is what buys insurance, so don’t wait until you’re older to purchase insurance thinking that you will likely live to a certain age.  

The younger you are, the less expensive it is to buy insurance and the cheaper it’ll be until you’re older. And if all you can afford is a policy for your burial (assuming you have no savings), then that is at least something and one less thing for your family to worry about after you die.   

Start your Financial planning now. The earlier you start planning, the sooner you’ll know where you are now, where you want to be later in life, and what you can do to achieve your financial goals.  

I have no doubt you have heard the phrase: Time is money, and it is indeed.  

The sooner you start your financial planning, the better it is for your and your family’s future. Procrastination is the enemy of financial planning, saving, and investing!   

When many people are young, they think they have a lot of time to save and invest for the future. Then they get married, have kids, and buy a house. With a mortgage and new expenses, money becomes very tight. They tell themselves they will start saving and investing later. As they enter mid life, their children go to college, and tuition takes a big bite out of their budget.   

Not to mention that some people have to care for their aging parents who may not have sufficient resources to care for themselves, or who may be stricken with illnesses that require expensive care. 

Very soon they will join the majority of people approaching retirement with little to no saving or investments. They know they must save, but now they say it’s too late. Many wonder: What if they had just put aside $100 or $200 a month when they were young? They could have accumulated significant assets today.  

So don’t you wait to start your financial planning, saving, and investing. Start to save as much as you can, as soon as you can, and for as long as you can. This will ensure that you and your family are more financially secure, and this creates peace of mind for everyone involved.