7 April 2021
Triangles represent geometric sturdiness; no matter how much weight you put on any side, it will not break. It is a shape that has survived the test of time – just look at the pyramids.
Financial advisers tend to agree on the golden triangle of long-term wealth. It’s not about how much you earn that makes the critical difference; it’s how you spend it, and how much you keep. The three sides that make up this golden triangle are insurance, savings and investment.
When looking at the cost of insurance, we all know someone who thinks that they will be able to put that money aside to use in a crisis instead of getting the insurance. In theory, this could work, but only if you honour your vow to save the money, and you can build up a nest egg before any form of disaster strikes. However, insurance is for life’s unexpected blows and preparing for the best is hardly planning for the unexpected. The sometimes incapacitating nature of insurable events only highlights the benefits, mentally and financially, that insurance provides. Insurance products have provided millions of people with a financial safety net, keeping their income, savings and investments safe.
Savings (income protection)
Debt is not only a money pit, but also an emotional stressor. The best defence against accruing debt is by maintaining an emergency fund to the value of three to six months of your average monthly expenses. Your savings can be used to ward off any suddenly-needed, large-sum purchases. Ideally, you should not be able to borrow from it spontaneously. It is better to have it structured so that you have to go through your financial adviser or the bank to access those funds for when you really need them.
Investments (building wealth)
Investments are a commitment from your present self to building the wealth of your future self. Study after study has shown that investing in a well-managed unit trust fund and leaving the interest to compound means you could do better over the long term than most other types of investments.
The magic of the triangle lies in the fact that each of the sides is supporting and supported by two other sides. As an SFP client, you benefit from more than the knowledge of one professional – you harness an entire team’s expertise.
The relationship between your financial journey, your planner’s knowledge, and the SFP team’s extensive experience and resources form a trifecta of financial strength.