Take Care of Your Chicken
Marshawn “Beast Mode” Lynch, the former NFL running back, recently advised young players to “take care of your chicken,” emphasizing the importance of managing your finances wisely while you’re earning. This guidance is crucial for developing a successful financial strategy.
You don’t need to be a multi-millionaire to benefit from this advice. Many people focus on acquiring wealth without considering how to protect it. Whether you’re monitoring spending, implementing a clear investment strategy, or utilizing insurance, a robust financial plan should encompass both offense and defense.
3 Ways to Protect Your Assets
1. Assess Your Risk
It's essential to ensure that the risk in your investment portfolio aligns with your potential returns. Poor investments have led many professional athletes to financial ruin, often due to taking risks without adequate research or understanding the business landscape. I’ve encountered numerous clients who base their investment decisions on friends' advice without considering their own financial situation and future goals.
2. Don’t Over-Leverage Your Assets
While leveraging debt to acquire income-generating assets can be effective, having a strategy for making debt payments is crucial, especially if cash flow is uncertain. Many property owners take out mortgages to buy rental properties but fail to set aside cash reserves for repairs or to cover expenses if a tenant doesn’t pay. It’s wise to prepare for worst-case scenarios to avoid financial strain. The 28/36 rule suggests that you should spend no more than 28% of your gross monthly income on housing costs and no more than 36% on total debt.
3. Utilize Insurance
Insurance is a valuable tool for transferring risk and protecting your wealth. From health and property insurance to life and liability coverage, the right policies can offer both peace of mind and financial security.
Life insurance, in particular, provides essential support to your loved ones in the event of your passing, helping cover living expenses, debts, and future needs. Death benefits are typically paid out tax-free to beneficiaries, ensuring they receive full financial support without tax implications.
Certain policies, like whole life insurance, accumulate cash value over time, which can be borrowed against or withdrawn. Additionally, some life insurance policies can serve as a supplemental income source during retirement, thanks to this cash value growth. Comprehensive insurance coverage can be vital for safeguarding your financial future.
Bonus: Account for Taxes
Taxes can affect the longevity of your assets, making it essential to implement strategies that minimize your tax liability. Tax planning should begin well before April, highlighting the need to create a comprehensive plan that aligns with both your current and future financial goals.
Schedule a complimentary consultation to explore strategies for accumulating and protecting your wealth.
