You’re Incredible!

You did it! Not only have you achieved a state of financial abundance, you’ve made it through the MoneySwell Financial Priorities Action Plan (and quite a bit of cheesy stock photography too!). This plan is MoneySwell’s longest action plan and if you’ve been using the platform for a while, there’s a good chance you moved through multiple stages of financial maturity along the way. Well done!

We structured this plan as a long-term roadmap to financial success. We vetted it with Certified Financial Planners. And we customized the articles and tasks based on your circumstances.

Additionally, we started with a clear understanding that there are plenty of places online and in print to get great financial education. But we believed in the power of a checklist. We thought that by breaking education and action steps into bite-sized chunks, and being willing to revisit topics based on a changing state of financial maturity, this action plan would be more useful than a book and better organized than a bunch of random internet searches. 

If you’ve gone through this plan by starting with the financial priorities survey and working your way through each item assigned to you, you’re a testament to the power of the plan. Thank you!

What’s Next?

Set a reminder to review each of the article titles in your action plan, across each of the plan’s tiers, on an annual basis. MoneySwell updates its content regularly and even in a state of financial abundance, it’s never a bad idea to continue your education and remind yourself of key financial topics.

As we release additional action plans, you’ll find some overlap with the Financial Priorities action plan. But you’ll also find new topics, more specific topics, and more short-term action plans to keep you on track.

Again, Congratulations!

We just have to say it once more: Congratulations for completing your action plan! We sincerely hope it is helping you to achieve a life well-lived for you and those you hold dear. Onwards!

Giving with Intention

As previously discussed, a money mindset focused on gratitude will naturally lend itself to thinking about how you can give back. And when you’ve reached financial abundance, one of the most effective ways to give back, is to give to charity. (You can also consider impact investing if you’re looking to generate financial returns alongside achieving your philanthropic goals.)

Based on your values and interest areas, you likely have a sense of the things that matter to you and the areas you want to impact. Then, If you don’t already have particular organizations in mind – or even if you do – it’s worth conducting a little bit of research on the organizations you’re considering. You want to make sure your contributions are having the impact you’re looking for. 

Finally, you’ll want to consider the best way to make an impact. For example, apart from setting up recurring donations or making a significant one-time donation, you can also set up trusts and other vehicles that will pass on your contributions once you die.

Let’s explore all three topics a bit further.

Start with Values

Before you even start researching organizations, take a moment to consider your values. What truly matters to you? If you could wave a magic wand and solve a problem, what would it be? In the notes section above, or on a piece of paper, list the top five or ten areas you would consider focusing your contributions on. For example this might include the environment, education, health, poverty, opportunity etc.

Once you’ve listed your focus areas, think about how connected you want to be to your contributions and impact. Are you comfortable contributing to a broad-based cause with a long-term (or even never ending) vision, knowing that every little bit of contribution counts? Or would you prefer to see more direct impacts from your contributions, knowing precisely that you helped conserve a particular ecosystem, provided educational opportunities to a particular group or even individual, for example.

By starting with your areas of interest, how connected you want to be to your charitable contributions, and understanding how your level of wealth (and therefore ability to financially contribute) can make a difference, you will have a clearer sense of where to start your research.

What to Consider When Researching Charitable Organizations

If you want to ensure your money is really being put to good use, you’ll want to start by vetting the charities or nonprofits on your shortlist.

Well-known organizations that can help you verify charitable organizations include GuideStar, Charity Navigator, and Charity Watch. Each of these organizations has a slightly different take on their validation process, what they report, how they rank them etc. Generally, you’ll be able to find charity profiles, publicly available information about the organizations from the IRS, navigate charities by category, and more.

Additionally, through Give.org, the Better Business Bureau provides a concise and clear snapshot of registered charities and nonprofits. And, if you want to make 100% sure that your contributions will be tax-deductible, you can go straight to the source and use the IRS’s Tax Exempt Organization Search tool.

Ways to Donate

The most common way to donate to charities is through direct donations. Typically, you can easily do this directly through a charity’s website. If you’re considering a very large donation, you may want to contact the charity directly and determine what makes the most sense.

If you happen to still be working or affiliated with a company, check to see if they offer a matching gift program. Many companies will match your charitable donations up to several thousands of dollars each year. 

Donating appreciated stock, real estate, or even land are also ways you can make contributions. In these cases you’ll want to work with the charity directly to see how they can accept these.

If you’re interested in making charitable contributions a part of your estate, or are particularly interested in how you can maximize the tax benefits of your charitable contributions, you’ll want to talk to a tax professional, Certified Financial Planner, or Estate Attorney. They may have you consider setting up vehicles like a Donor-Advised Fund, Charitable Remainder Trust, or simply updating your will.

Conclusion

If you’ve done a thorough job considering your values, the areas you want to impact, the organizations you want to support, and the ways to leverage your resources to execute your donations, you’re sure to feel good about your charitable contributions. 

Remember, money is never good or bad. Money is simply a resource or a tool that can be leveraged in a variety of ways. Now that you’re in a state of financial abundance, you have a great opportunity to leverage your money with purpose to create the change you want to see.

Investment Alternatives Outside of the Stock Market

At any stage of your financial maturity you have the ability to pursue investments that lie outside of publicly traded companies in various stock exchanges. However, once you’ve reached the stage of financial abundance, you’re more likely to consider a range of alternative investments. Some of these, like real estate, are quite common. Others, like private equity or collectibles, are less common.

This article covers some specific alternative investment options. However, the primary aim of this article is not to cover alternative investment opportunities in detail. Rather, the focus is providing a framework for how and when to consider alternative investments so you can be thoughtful about your approach.

Considerations for Alternative Investment

1. Start with Why

Start with understanding your motivation. Put simply, you should understand why you are interested in alternative investments in the first place. For example, are you looking for the thrill of the chance for outsized returns, a hedge against major economic headwinds, a hobby, or serving an underserved market? Perhaps your goal is as simple as carving out a part of your portfolio for a specific purpose, like purchasing a vacation property to enjoy and eventually pass on to your heirs.Whatever your reasons, having a clear-eyed picture of your ‘why’ will inform how the rest of your strategy takes shape.

2. Consider Your Balance

Next, it’s good to review your entire investment portfolio and consider what percentage you want in ‘alternative’ assets. Since investing in alternative investments can often be more speculative and driven by emotion, it’s good to set some personal guidelines. If your goal is to have no more than 5%, 10% or 20% allocated to alternative investments while the rest remain in a more traditional stock and bond portfolio, make that clear from the outset.

Additionally, consider if your investments will be one-off purchases or if you plan to pursue a more intentional, longer-term strategy. For example, you may be interested in collecting and investing in fine art. If you’re pursuing that purely as a hobby, maybe making only a one off purchase here or there, you would buy exactly what you want with little regard to the purchase from an investment standpoint. However, if you plan to develop an area of expertise and build a significant collection that you hope will appreciate, you may want to more carefully consider your purchases.

3. Get Educated

Finally, consider how you will educate yourself about the space you plan to invest in. Even if you already have a fair amount of expertise in your alternative investment area, it’s worth seeking out additional resources.For example, Imagine a realtor. Any good realtor will know a lot about real estate and will have helped many clients buy and sell homes. But purchasing an investment property may be a new experience with a host of different things to consider. Considering needs for property maintenance and management, doing a detailed financial analysis of whether or not the property makes sense from a pure money-making perspective, and more are all areas the realtor may need to get more familiar with.

No matter your alternative investment area, there are sure to be numerous books, podcasts, local experts, or even classes or seminars that cover the topic. Make sure to leverage these resources before diving in.

Common Alternative Investments

The list below are just a few alternative investments among a wide array that exist outside a public stock market. We’ve chosen them because they differ from each other in obvious ways but as a group, they represent a wide range of considerations that would apply to many alternative investments.

Real Estate

Investing in real estate is one of the most common alternative investment strategies. Many enjoy the fact that real estate is a tangible asset. Investing in real estate can be a pure financial play, or the property can be used for personal enjoyment. 

Real estate has the potential to generate returns in three ways. First, you can leverage rental income to pay down the mortgage and build equity. Second, any rent above and beyond the principal, interest, insurance, taxes, and ongoing maintenance costs, can provide a regular stream of monthly income. Finally, you have the potential to generate returns through capital appreciation in the value of the property over time. As your property’s value appreciates, you are building additional equity. In the right markets, this has proven to be quite valuable to homeowners over longer periods of time.

When considering investing in real estate, you’ll want to do your research on the location. This means considering the neighborhood, rental rates in the area, environmental factors and more. You’ll also need to consider how the property will be managed. Will you hire a management company or do it yourself? Will you perform maintenance or contract it out? Do you plan to own the properties for longer durations or are you focusing on renovating and “flipping” properties?

There’s a lot to consider before investing in real estate and it’s important to do your research. While many have done very well with this type of alternative investment, others have lost significant sums unexpectedly. But with solid planning and research, investing in real estate can be a worthwhile addition to your overall investment strategy.

Angel Investing, Venture Capital, & Private Equity

Whether you’re angel investing, investing in venture capital, or private equity, these are all different flavors of the same basic concept: you’re investing in privately owned companies that are not publicly traded on a stock exchange.

Angel Investing

This typically involves the least amount of money upfront, typically between $10k – $500k. Angel investors are often investing in very small, unproven companies. In fact, the earliest angel investors may be investing in a company still looking to hire its first employees.

Not surprisingly, the risks in angel investing can be very high. There’s a good chance your investment will be worth nothing when all is said and done. Often, angel investors will invest in multiple companies with the hope that a few or even just one go on to be successful.

Despite the risks, the potential returns from a successful angel investment are significant. As an angel investor, you’re typically able to acquire a relatively large share of a company for the price. As new investment comes in, your percentage ownership may change over time. However, the price you paid for your initial shares will be quite favorable. As they say, the early bird gets the worm and this is certainly true of angel investing.

Venture Capital

VC investing is a bit harder to get into than angel investing. It usually requires an investment of at least $1M to get started and you will typically need to become a partner at a Venture Capital fund. To do this you’ll either need to have a successful history of angel investing, be an accredited investor, or both.

Venture capital investing is a high risk, high reward investing environment. However, due to the larger size of a venture capital fund and the fact that investments are made in companies with a longer track record, venture capital investments are typically viewed as less risky and less rewarding than angel investments.

Private Equity

Private Equity is the broader category of investing that includes Venture Capital investing. These investors are typically known as “retail investors.” Retail investors invest through a private equity firm who will invest funds in companies on behalf of its investors. While the financial minimum bar for investing in private equity can be as high as $25M, according to Harvard Business Review, some firms have much lower minimums (possibly as low as $25k). Typically, investing with a private equity firm will be less risky than venture capital or angel investing.

Regardless of which form of private investing you’re interested in, it’s important to know there is typically a long time horizon before returns may be recognized. A five to ten year time horizon is typical. It’s always important to do your research, find a category and a firm (if applicable) that interests you and fits your style, and manage your risk appropriately. 

Collectibles

If you’ve ever watched The Antiques Roadshow, you know it’s possible to make a good return on something rare and old. But if you want to invest in collectibles beyond a hobby, it takes a lot more than combing through a few garage sale items and selling what you find for thousands more at auction. To invest in collectibles, you need to be a true expert.

Collectibles can be defined as anything that either appreciates over time or that you already know someone else would value more at auction if sold today. Most commonly, collectibles include:

• Antiques
• Art
• Cars
• Coins
• Jewelry 
• Sports cards and related memorabilia
• Stamps
• Wine

In addition to expertise, major considerations for investing in collectibles include understanding how to physically store and care for your items, recognizing that they are illiquid assets until sold, can have highly volatile valuations, and may have a limited market of potential buyers. All that said, there are many worse ways to spend your time than researching and collecting within the category of your choice. If you find it interesting there’s no reason you can’t try your hand at collectibles investing.

Final Thoughts

The alternative investments listed above are just the tip of the iceberg. Cryptocurrencies, physical commodities, direct lending, and more are also available investing options. What matters most is that you are thoughtful about why you are pursuing these strategies, have a clear idea of your goals, and are educated in the investment areas of choice. Using this framework you are more likely to maximize your success (however you define that) and mitigate risk and the possible impacts of unwanted outcomes. 

Remember, just because you can pursue alternative investment strategies, doesn’t mean you must. If you’ve reached the stage of financial Abundance through mastering financial fundamentals that are commonplace, there’s no reason you have to abandon that now. But there’s also nothing wrong with experimenting with a few alternative investment strategies if that’s something that interests you.

Term vs. Permanent Life Insurance

When it comes to life insurance, there are two main types: Term and Permanent. Term life insurance offers coverage for a specific period (often 10, 20, or 30 years), is relatively inexpensive, and simple (pay your premiums and if you die during the term, the benefit will be paid). In other content, we’ve noted that term life insurance – for most people – is the way to go. 

However, if you’ve reached the stage of financial Abundance, there may be good reasons to consider a permanent insurance policy. At its most basic, the difference between Permanent and Term life insurance is that Permanent life insurance lasts a lifetime (or as long as you pay your premiums) whereas term only lasts for the specified term. 

This article aims to provide you with a basic understanding of permanent life insurance. After reading it, you’ll be prepared to ask intelligent questions in the event a financial or insurance professional pitches you on the idea. From there, you can decide if it’s right for you.

Common Reasons to Consider Permanent Life Insurance

Below are some of the most common reasons people consider a permanent life insurance policy.

• Need for Payout, Regardless of When You Die: Life insurance is necessary if you have financial dependents, typically children. The goal of a term policy is that it should end when your children become financially independent. However, if you have financial dependents with special needs or disabilities, a permanent policy ensures for their ongoing care after your passing.
  

  A permanent life insurance policy ensures you will leave something for your financial dependents regardless of when you die.

• Desire to Leave an Inheritance: With any active insurance policy, there is a death benefit. This is the money that is paid out to the listed beneficiaries upon your death. If you are looking for a way to effectively guarantee that your beneficiaries receive a benefit regardless of when you die, a permanent life insurance policy can give you this option.
  

• Desire to Cover Final Expenses: Permanent life insurance can offer readily available cash for final expenses such as funeral services. Additionally, since life insurance benefits aren’t generally taxed, a permanent policy can also be used to help cover estate taxes. The beneficiary will have flexibility to determine how the funds are used, but the policy’s intended purpose may affect how you size and structure the policy.
  

• Desire to Leverage Cash Value of the Policy: Permanent life insurance policies typically have a cash value component. A portion of the premiums paid goes into a cash value account, which can grow over time. This cash value can often be accessed through policy loans or withdrawals, providing a potential source of funds for emergencies or future expenses. Do note however, that there are often better ways to serve these purposes. Therefore, a desire to leverage the cash value is rarely a reason on its own to consider permanent life insurance. 

If the reasons listed above fit your circumstance, use the My Notes tool above to write down your thoughts and keep reading.

Components of Permanent Life Insurance

Permanent life insurance policies can be complex. To make matters more confusing, different providers use names specific to their companies to describe different policy arrangements. But most policies will have some mix of the components described below.

• Death Benefit: This is the cash paid to policy beneficiaries upon the death of the policy holder.

• Premiums: These are the annual dues you pay to keep the policy active.

• Cash Value: This is the value of the policy available for loans or payout should you choose to discontinue the policy. Note that the concept of a “Cash Value” only applies to permanent life insurance policies. 

• Investments: Some portion of your premiums may be used in an investment component. The performance of the investment component may affect the cash value of the policy.
• Dividends: These are payouts based on the investment component. Often, dividends are used to pay a portion of policy premiums or increase the cash value of the policy.

Types of Permanent Life Insurance

Within the category of permanent life insurance, there are few subcategories: Whole Life and Universal Life. Take a look at the chart below to understand the differences.

With Universal Life policies, two sub categories are “Variable Universal Life” and “Indexed Universal Life.” “Variable” ties the cash value component of the policy to stock market investments. In these policies, you have no cap on gains but also no floor on losses (i.e. you could lose the entire cash value of your policy).  “Indexed” ties the cash value component to a specific broad stock market index. Here, you have a cap on gains and losses.

The Takeaway on Permanent Life Insurance

Permanent life insurance policies sometimes get a bad rap due to their complexity and the fact that most people will be better served by Term life insurance. But the truth is, in certain circumstances, they can be a useful tool in your financial toolkit.

If you’re considering a permanent life insurance policy you’ll want to do additional research on the cost of the policy, cash value, whether or not a health exam is required, and how it might factor into your longer-term estate plan. Be sure to make a list of your questions before you meet with an insurer and that you fully understand your policy before you commit. 

Why Work with a Professional?

If you’ve reached the stage of financial Independence or Abundance, there’s a good chance you’re already working with a financial planner. But if not, it’s certainly worth considering now. In all likelihood, your financial life is more complex and the assets you’re looking to protect are more substantial than they’ve ever been. Finding a trusted advisor – or even a team of professionals – who can help you manage your wealth shouldn’t be overlooked.

In this article, we’ll outline the steps to take to ensure you find the right fit for your needs.

Step 1: Define Your Objectives

Start by defining your objectives. This will ensure you only interview candidates that are a good fit for your needs. While many financial planners have a wide range of expertise, they’re still likely to specialize in certain areas. Consider if your focus be:

• Preserving wealth
• Optimizing tax strategies
• Exploring new investment opportunities
• Planning for future generations
  

You may find it helpful to rank your objectives from most to least important. Ranking your objectives doesn’t mean there’s a huge gap between the most and least important items. But it will ensure your interviews cover the topics that are of the highest priority.

Step 2: Understand the Range of Services and Fee Structure

Wealth management and financial planning can encompass a wide range of services. Look at the list below and consider which services interest you and how they align with your objectives.

• Investment Management – manage investments on your behalf based on your risk tolerance and goals
• Estate Planning – determine how your assets will be managed and distributed after death
• Tax Optimization – minimize your tax burden so you can maximize your financial resources based on your values
• Philanthropic Strategies – understand and set up vehicles to maximize the impact of your charitable giving

It’s also important to understand the planners’ fee structure. Some financial professionals will charge by the hour, a flat project-based fee, or use a retainer structure. Others will charge based on a percentage of the assets they manage for you. (If you don’t use investment management, this shouldn’t apply.) Most professionals will offer a free session or a chance to interview them. Take time at this meeting to understand how they are compensated and let them give you an example of what that looks like.

Step 3: Find Fiduciaries

A fiduciary means that the financial professional acting on your behalf is obligated to act in your best financial interest. Not all financial advisors are fiduciaries, and even among those that are, they may not be a fiduciary in every capacity that they operate. For example, it’s possible for a professional to be a fiduciary for tax planning purposes, but when it comes to making investment decisions on your behalf, they may receive compensation if you purchase certain investment products. This represents a conflict of interest and may result in you purchasing investment products that aren’t suitable for you.

You can generally avoid this by finding an professional who works on a fee-only basis. A good place to conduct a search is the XY Planning Network and NAPFA (National Association of Personal Financial Advisors). Both these organizations only allow credentialed and fee-only advisors to be listed.

Whomever you interview, always ask, “Do you act as a fiduciary in all capacities?” It’s also a good idea to ask them to put this in writing if you decide to work with them.

Step 4: Conduct Your Interviews

You should interview multiple candidates, we recommend at least three. Remember, your financial planner is someone you may work with for decades. It’s much more important to make a good decision than a quick decision.

When you call, email or conduct in person interviews, it’s important to assess each candidate’s communication style, responsiveness, and willingness to understand your unique needs. Look for an advisor who demonstrates active listening, empathy, and the ability to explain complex concepts in a clear and understandable manner. At a minimum, make sure you come out of the interviews understanding the advisor’s:

• Years of experience
• Areas of expertise
• Official credentials (e.g. Certified Financial Planner etc., consider the governing bodies that regulate those credentials – e.g. FINRA, SEC etc.)
• Fee structure

Finally, make sure you have had enough time to explain your goals and the specifics of your situation.

Step 5: Conduct Due Diligence

After your interviews, it’s important to do a few pieces of due diligence. Even if the person was recommended by a trusted friend or works for a bank or other well-known institution, you should confirm a potential advisor’s qualifications, certifications and professional reputation.

FINRA, (Financial Industry Regulatory Authority) is a government-authorized not-for-profit organization that oversees U.S. broker-dealers. They should be a go to source for verifying credentials. They also have an incredibly helpful list of financial professional designations.

When it comes to Certified Financial Planners (CFPs) specifically, you can check designations and find other helpful resources at letsmakeaplan.org.

Don’t Wait

Don’t rush to find the right financial advisor. But don’t put the decision off either. By following the guidelines above and conducting a reasonable amount of due diligence, you’re sure to find a planner that meets your needs. Remember that a strong advisor-client relationship based on trust, expertise and open communication is the foundation for achieving your financial goals, even if you have already achieved financial prosperity.

Why Optimize Your Taxes?

Optimizing your taxes does not mean skirting your legal obligations or playing by a different set of rules than everyone else. Instead, tax optimization is about making a plan to ensure your resources are put to their best use. 

Reasonable people differ in their opinions about how the tax system should be structured to optimize for fairness and impact. But none of this changes a central fact: When it comes to making an impact with your financial resources, you can only do so with the resources in your control. That may be as simple as providing for a certain kind of lifestyle or as grand as starting a charity.

Whatever the case, when you’ve reached financial abundance, your assets will have an impact one way or another. Therefore, you may as well take a bit of time to consciously optimize how they are structured and used.

Why Work with a Tax Professional?

The U.S. tax code is close to 3,000 pages to over 70,000 when regulations and guidelines are factored in. 

But regardless of how many thousands of pages the tax code actually is, a few fundamental truths stand out:

• Taxes are complex. Even those with relatively simple tax situations have encountered questions about how to correctly file their taxes. When assets are more significant and diversified, complications can arise long before a tax filing deadline is even considered.
  

• You have choices. Many choices you’ve made about how to structure your finances may have been done for reasons other than tax optimization. Nonetheless, these arrangements (e.g. insurance, annuities, trust etc.) may have tax implications. It’s important to understand what choices are available and have a clear understanding of how they may affect your situation.
  

• Professionals can help. Unless you’re already a tax professional, working with a Certified Financial Planner (CFP), Certified Public Accountant (CPA), or a lawyer who specializes in tax-related issues, is a great way to help you sort through the complexities and choices of tax planning and preparation. Their services will more than pay for themselves in the form or a reduced tax burden, or, at the very least, peace of mind that you’ve thought through all your options.

Common Concepts to Discuss with a Tax Professional

There is no way an app like MoneySwell could know enough about your situation to provide detailed tax optimization guidance. This is where working with a CFP or other professional comes in. However, below is a list of three common ideas worth familiarizing yourself with. While not comprehensive, these topics can be a good starting place when you meet with a financial professional.

• Roth Conversions: This can take a few different forms. But the basic concept is that investments in a “Roth” retirement account are not taxed. Therefore, converting some assets in a non-Roth account to a Roth account may be beneficial. Of course, while you won’t be responsible for paying taxes on income from this Roth account after the conversion, when the conversion is first made you may have a tax liability. Often, individuals try to time Roth conversions in years where losses or other tax credits will offset some portion of the tax liability of the converted assets.
  

• Charitable Contributions: Donations made to registered 501(c)(3) Charitable Organizations typically qualify the doner for a like amount in reduced taxable income. While most of us are very familiar with this concept, a tax professional may alert you to additional options. For example, setting up a Charitable Remainder Trust (CRT) has the potential to provide a tax free income while also designating any leftover amount at the time of your death to your predetermined list of charitable organizations.
  

• 529 Plan Funding: If you have children or grandchildren, you’re likely familiar with a 529 Plan. And when you have significant financial assets, the concept of “Superfunding” a 529 plan may come into play. The website Saving For College has a detailed article on the concept but the basic idea is that you can help your heirs pay for college while reducing your tax burden at the same time.

Finish Strong

You’ve worked hard to reach the stage of financial abundance. You now have an opportunity to set things up such that your money works for you and your values. Therefore, now is not the time to sit back and let things happen. Only by taking an active role in managing your financial abundance, can you maximize its impact.

What is Financial Abundance?

Financial abundance isn’t just for “rich people.” Anyone who is financially independent and still has assets beyond their current needs and what they’re likely to need in the future, is in a state of financial abundance. Abundance is the final stage of financial maturity.

In this stage, your money mindset should focus on:

• Appreciating your relative wealth
• Considering your values and leveraging your wealth to express them
• Considering your legacy

Getting to Gratitude

In a world where social media shows idealized versions of people’s lives, and where the range of wealth even within “Financial Abundance” can still be staggering, it’s easy to forget what it means to be wealthy, and to be grateful for what we have.

In his book, The Psychology of Money, Morgan Housel writes, “Wealth is financial assets that haven’t yet been converted into the stuff you see.” We agree. In fact, we believe that true wealth is about security, freedom, and happiness. And while money plays its part, by no means is it the full picture. Additionally, while achieving financial abundance is a straightforward math equation, experiencing lasting happiness is a lifelong practice. 

And this begs the question: How can we leverage a state of financial abundance to increase our happiness? We believe it starts with gratitude.

Financial abundance typically arrives after a healthy dose of hard work and good financial habits. But it’s highly likely that good fortune played a significant role as well. Regardless of how you see this balance in your own story, a mindset underpinned with gratitude is likely to be one that leads to happiness. In her book The Gratitude Connection, Amy Collette writes, “Gratitude is a powerful catalyst for happiness. It’s the spark that lights a fire of joy in your soul.”

Steps to Take

To cultivate your mindset of gratitude, you may want to look at your wealth from a macro perspective using a calculator like one from the World Inequality database. Comparing your wealth on a broader scale can prove illuminating. You may also want to consider your financial journey in the context of time and place. For example, had you been born in a different time or place, would that have impacted your ability to achieve financial abundance? Were there unique connections or coincidences along the way that helped spur you to where you are today?

That you are reading this blog – let alone that you may be in a state of financial abundance – means you are literate, and have access to the internet. With that as a starting place, we’re certain you have much to be thankful for.

From Gratitude, to Giving Back

Once your mindset is one of gratitude, you’ll likely be excited about opportunities for giving back. Reflecting on your values, and your story may help you identify the areas you’re most interested to have an impact. For example, if you value spending time in nature and exploring the outdoors, consider causes related to conservation. If you value the arts, quality journalism, or education, look for causes where your resources can make a difference there. 

Next, consider your personal story. What opportunities did you receive that others weren’t? Were there individuals or organizations that had an outsized impact on your life? Many find satisfaction in mentoring the next generation or helping to provide unique educational opportunities to underprivileged youth. 

As you evaluate your options for what you want to give back to, consider how you want to give back as well. Recurring or one time charitable contributions are one method. But don’t underestimate the value of volunteering. Mission-driven organizations face other constraints beyond finances. You may have an area of expertise that can be of great value. It may be in something as general as project management or marketing, to something as specific as software development. And don’t forget that some volunteering just needs bodies to fill a role. If you’re physically able, this might mean weeding a hillside of an invasive species or working on trail repair. Or it could be manning a ticket booth or handing out cups of water at a race.

For most in a state of financial abundance, there is more flexibility in how time and money is spent. Test out what works for you and know you can always make a change if it doesn’t feel right.

Legacy is about Meaning

For some, the word “legacy” may conjure thoughts of ego or self promotion. A university library built in your name, is certainly “legacy” building, but also a pretty public display of wealth. But, the value of considering your legacy goes beyond ego. The first part of retirement – or any time after reaching financial abundance – can be confusing and difficult for many people. For the first time, you may be faced with the reality that you don’t actually need to do anything. This can produce feelings of aimlessness or even despair.

However, by thinking hard about your legacy, you’re forced to think about something bigger than yourself. It’s your legacy that lives on when you’re gone. Therefore, by focusing on how you will be remembered and the impact you can have even after death, you can bring new meaning and value to the work you do once achieving financial abundance.

Summary

Much like your high school prom, going to college, or getting that first salaried job, if you’ve just entered a state of financial abundance you may find it feels different than you anticipated. However, you can ensure that this stage of financial maturity is as fulfilling or even more fulfilling than any that came before by focusing on gratitude, the ways you can give back, and the legacy you will leave behind after you die.

<< Understanding Basic Insurance Needs

Who Needs Life Insurance?

If you have people that depend on you financially (e.g. spouse, children, or possibly parents), you need life insurance. Life insurance comes in two main types, “Term” and “Permanent.” 

Term Life Insurance

Term life insurance lasts for a specified term (usually between 10 and 30 years), typically has a fixed monthly or semi-annual premium, and provides a lump sum benefit to your beneficiaries when you die. This lump sum benefit is typically tax free. Term insurance is the most common type of life insurance, is reasonably priced (although your health and lifestyle can affect this), and according to experts is the right choice for most people.

Permanent Life Insurance

Permanent life insurance lasts for the entire duration of an individual’s life as long as the premiums are paid. It consists of both a death benefit and a “cash benefit.” The cash benefit is essentially a savings vehicle. Typically, part of your premiums are invested and you can receive some of the returns if you cancel your policy. Sometimes you can even borrow against your invested assets. Permanent life insurance policies are more complex than term policies and on average your premiums will be 6-10x more expensive. 

There are reasons that both types of insurance can be good depending on your situation. But Term life insurance is much more common due to lower premiums. Additionally, the invested cash value you can get from a permanent life insurance policy is unlikely to be the best way to invest those dollars. In other words the standard recommendation is to buy cheap term life insurance and invest the difference in the premium prices in other ways if you’re able to.

The amount of insurance you need is often calculated at 10x your annual salary. Some people get a little more detailed and will add in things like debt owed and higher education expenses that they plan provide for their children. But some version of the “10x salary + other expenses” is a good rule of thumb to estimate how much life insurance you need.

Significant Insurance Types to Consider

• Life – if you have financial dependents, you need this insurance. Most people get “Term” life insurance but a minority of people will get “Permanent” (sometimes simply called “Whole”) life insurance.
  

• Auto – if you own a car you need car insurance and the “Liability” component of car insurance is legally required in most states.
  

• Home – this protects your home and may also provide a layer of liability protection for certain types of accidents – sometimes even ones that didn’t happen on your property.
  

• Renters – this can provide protection for your belongings, costs associated with water damage, temporary housing if your unit becomes unlivable, liability protection and more. 

• Disability (LTDI) – this provides a level of income replacement should you become disabled and unable to work. It may be offered through your employer.
  

• Long-term Care (LTCI) – this provides payouts for specific costs associated with skilled nursing or facilities should you require these for health-related reasons.
  

• Umbrella – this provides an extra layer of liability protection (beyond what you may have with home or auto) in the event someone tries to sue you for an accident.

Details

Your focus is to become financially independent and you have worked incredibly hard to reach this stage. But unforeseen events and accidents happen. If you’re not prepared, everything you’ve worked for can be put at risk in a matter of moments.

But here’s the good news: Each type of insurance listed above is easily understood, and easy to acquire. Additionally, relative to health insurance, these types of insurance are comparatively inexpensive.

Some of these insurance types can be purchased and bundled together with your traditional “Home, Auto, Life” companies (and bundling usually saves you money). Others can be purchased through your current employer. (Important: If the policy is paid through your paycheck it will become inactive when you leave that job.) Finally, some insurance types are most easily purchased through an insurance broker.

Action

If any of the insurance types above might make sense for you, click their links to learn more. If you decide you need that type of insurance, add the task to your plan.