Take steps to ensure your financial cornerstone

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Bob Land


Business Columnist

Monday, May 14, 2018

A cornerstone — foundation stone or capstone — is the first architectural stone set in the construction of a masonry building.

It is set near the base of the building where two main exterior walls meet. Every other wall aligns in harmony with the cornerstone.

As a working adult, what is the bedrock of your financial plan? What is your most important asset? Is it your home? Your car? Your lifestyle? Your 401(k) or other investments?

No. Your financial cornerstone is your ability to earn an income. Without income, everything financially stops. Your continued cash flow is absolutely essential to pay your mortgage, car payment, day-to-day bills, lifestyle, investments, hobbies and vacations.

Your Incredible Earning Capacity: 25-year-olds earning $ 30,000 a year will earn $1.2 million by age 65 if they never get a raise. Realistically, they will receive raises during their working career. They have “millionaire earning capacity.” Therefore, they should be prudent and protect their “capacity” or they could stand to lose $1.2 million or more.

There are two kinds of lost income:

■ Lost income due to death: The afternoon before our first child was born, I purchased additional life Insurance. I knew the $15,000 group term life insurance at my employer would not go very far. I spoke with a financial advisor and purchased over 10 times my annual income of term life Insurance for my wife and myself. I felt great because I now had a better financial plan that was very affordable and practically protected and loved my wife and child. But was I through? I thought I was, since I had covered my lost income due to death with life insurance.

■ Lost income due to disability: Protecting this is the cornerstone of your financial plan.

Several years later, I fortunately met a more experienced financial advisor who asked me a vital question. They asked, “Have you put your financial cornerstone in place?” I said yes, I have the right amount of life insurance (approximately 10 times income). They replied, “That is really good planning. But it is not comprehensive. Would you like to be comprehensive? I said yes. “You have not addressed the biggest risk you have. The cornerstone of your financial plan is not laid yet. What happens if you have a sickness or accident that reduces or completely stops your income? You need an affordable individual disability income protection plan. Without that, you really do not have a financial plan.”

I saw the need and quickly bought it. I discovered that a disabling sickness or accident was the biggest financial risk I had. Disabilities are four to five times more prevalent than me dying and cause 48 percent of home foreclosures. Solving this need was very affordable. The disability income protection plan filled the financial holes in Social Security and my employers group Long-Term Disability plan. I now had covered the more probable lost income due to a disability. My financial security plan was comprehensive. I was now “planned, better prepared for the future and had great peace of mind.”

One day when my retirement plan is ready, I can step into retirement or partial retirement. Then I can reduce and then finally eliminate my disability income plan. But for now, it is vital to guarantee our family’s wonderful lifestyle.

Is your financial cornerstone in place? Do you have a disability income plan current with your income and lifestyle?

You will experience great financial peace of mind when it is.

Bob Land is an executive and employee benefits specialist with Landmark Financial Services LLC.