The Important Financial Four
In the spirit of last month’s NCAA men’s and women’s basketball March Madness and Final Four, the National Endowment for Financial Education (NEFE) created its own “Final Four” of Finance. More than 300 financial advisers through the Financial Planning Association (FPA) submitted their rankings of 32 important financial planning topics. The NEFE and FPA identified the primary financial topics that people need to consider for 2012. Topics included having a will, goal setting and family communication.
After several elimination rounds, the topics were narrowed down and ranked according to the financial brackets. According to the financial experts, the top four are what Americans should prioritize as the most important in 2012. Ted Beck, president and CEO of NEFE stated, “It can be overwhelming to prioritize all of the things you need to accomplish to keep your financial life in order. The Financial Four is a fun way to help people visually rank and arrange their financial responsibilities.”
Based on the results, here are the 2012 Financial Four in order of importance:
1) Live Within Your Means. Not surprisingly, this was the overwhelming top choice among financial planners and advisers. Spending less than you earn and living within your income range is the best way to ensure you meet your financial goals.
2) Protect Yourself with Adequate Insurance. Ensure your financial security by having adequate insurance coverage in place for health, disability, long-term care, auto, homeowners’ and renters’ to protect yourself and your assets.
3) Build an Emergency Savings Account. Prepare for the unexpected by having this important reserve. Keep this account separate from your savings and aim for three to six months of living expenses. Starting with a small reasonable goal – as little as $500 – will help springboard you toward this goal. Your tax return may provide a great way to start!
4) Establish Life Insurance for Wage Earner(s). Protect your family by having adequate life insurance for all wage earners. Having a policy in place to cover six to 10 times your gross annual income will ensure financial security for your loved ones if you are not there to provide for them. (http://www.nefe.org/PressRoom/News/FinancialFourMoneyHasaBracketToo/tabid/1106/Default.aspx)
Given the complexity of financial planning, the goal of the Final Four of Finances was to take part of the “madness” out of planning to get people on the right track. For a complete list of all of the 32 financial concepts, visit www.financialfour.org and complete your own bracket.
What is your Final Four? What are your top financial priorities? Each person will have different priorities based upon where they are in their financial timeline, but it is important to keep as many of the concepts in mind when taking a big picture approach to your personal finances.
After you have determined your top picks, it is time to implement toward the path to financial prosperity!