Wealth Protection

Wealth protection is boring. No, I admit it is, but before you start on your road to financial independence and to accumulate your wealth it is important to spend some time and thought on wealth protection before the money starts to come. After all, when is the best time to fix a leaking bucket? Yep, before you put water in it.

Here is a list of things I think are essential to consider before you start to accumulate wealth. Do consult an Independent Financial Advisor (IFA) before you purchase any wealth protection products. If you haven’t already, please read Step One – How to Get Control of Your Money.

Income versus expenses

This is a must: Your income must cover your expenses and also provide an excess that can start to build up your Wealth. It’s amazing when I hear people say that they would love to be rich and not have to work, yet they regularly live outside of their means. I think they are confused as to what real wealth is. These people are really living hand to mouth. They are just one month away from financial ruin. Therefore this has to be the very next step in your plan, after you know what state your finances are in: get your income to more than cover all your expenses and also to provide some savings.
There are only two ways to do this. We will go into more detail later on:

Reduce your expenses.
Increase your income.

Life Assurance

It’s a chilling thought and not something we want to dwell on but if the worst was to happen and you pass away, would your family be provided for? Therefore the next step will be to consider Life Assurance, which will provide a payment should the worst happen. Once you set up a small monthly payment, that’s it – you can forget all about it.

Insurances

Insurance is a critical part of wealth protection. This includes Home Buildings and Contents Insurance, Car Insurance, Travel Insurance etc. Most people have these in place but are they sufficient? It’s tempting to go for the cheapest option to cut down costs but if you need to claim, will it cover you sufficiently?

Income Protection

What would happen if you lost your job suddenly? Or what if you became ill and couldn’t work for a period of time? Do you have any savings to fall back on? Think seriously about setting up Income Protection that will pay out monthly sum.

Mortgage Protection and critical illness cover

If you have a mortgage, I guess you will have been sold on getting Mortgage Protection and Critical Illness cover. Mortgage protection will pay out a sum to cover your mortgage capital and interest payments, if you die or are ill. Critical Illness cover will pay out a sum if you are diagnosed with certain specified illnesses. Do get these products, but do shop around and don’t necessarily take your mortgage providers product.

Wills

Do you have a will? Again anyone serious about financial freedom should get a will. This is one of those jobs you know you should do, but keep putting off.

Company Pension Scheme

Really this is investing, which we go into later, but I look at the Company Pension as a Plan B. If your Company provides a Company Pension Scheme it is really a no-brainer; You really should join the scheme, especially if the Company matches your contributions. Your contributions will be deducted before PAYE tax is deducted so you will be paying less income tax.
So there you go – these are the boring but essential foundations to put in place. Next we will start looking at the fun stuff – how to pay yourself first to start building up your investment capital.