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How Stable Is Your Financial Plan?


By Krista McBeath, McBeath Financial Group

The Great Pyramid was constructed for a specific purpose, using precise engineering and attention to detail, and was designed to stand the test of time. No matter how volatile the environment or uncertain the conditions, this ancient creation has endured. The same should be done with your financial plan.

In the past, there was a reasonable trade-off between the ups and downs of the markets and the security and predictability of safer options. Today, it is more difficult to decide how much of your money should be in a volatile marketplace and how much should be locking in low fixed rates. And the decisions you make now will impact your financial picture for years to come.

Organizing Your Assets
Two types of money:
Green Money—“Know So” money represents your assets which have guaranteed values and/or guaranteed growth. Green Money forms the base of your financial pyramid and provides the stability every plan needs.

Red Money—“Hope So” money represents assets with uncertainty. Red Money may be invested directly in stocks and bonds, or assets may be placed in other instruments that do not provide guarantees.

There is nothing inherently good or bad about either type, and both serve their own purpose. But it is vitally important to know how your assets are allocated between the two and to keep them in an appropriate balance.

To build a financial structure that will stand the test of time, there are four key areas to consider: income planning, asset allocation, tax planning, and legacy planning.

Income Planning
You will always have money coming in and money going out. Start by ensuring your income is adequate to maintain your standard of living—not just for today but with an eye toward the future and the unexpected. It isn’t just the amount of income that is important, but how you manage the various sources of income.

Asset Allocation
Once your income plan is designed, your assets need to be aligned with your risk tolerance and growth expectations. You may receive options that allow you to trade off some liquidity for additional growth or ones that allow you to take advantage of the latest managed money platforms. It may be appropriate to have some of your money in the market but significantly reduce volatility. For example, it might make sense to have some of your money be in “Green Money,” and to have the remainder in options that have fewer guarantees but more upside potential. 

Tax Planning
While it may be true that nothing in life is certain except death and taxes, there are a number of strategies which allow you to minimize the effect of taxes or avoid some taxes altogether. While many accountants and other professional advisors are helpful in advising on how to save on taxes in the current year, a long-range plan is more concerned with saving more money on taxes over time, with a long-range tax strategy. This is the difference between a micro-tax strategy and a macro-tax strategy. One example might be a 401k Roth conversion, where the immediate tax hit is potentially out-weighed by the long-term tax benefits. A full-service financial firm that includes both financial and tax professional experience can be an invaluable tool to ensure you don’t pay any optional taxes or unduly expose yourself to future tax risk.

Legacy Planning   
The planning process inevitably leads to thinking about the value of the plan for future generations. It’s important to lay the groundwork for turning your financial plan into a legacy for your children, your grandchildren or a charity for years to come. This legacy can extend beyond a simple financial bequest. If properly designed, it can be a part of a risk tapestry supporting the values you instilled in your family. The actions you take today for your financial plan will have an impact on the world after you are gone.

A financial plan is just a starting point—a beginning and not an end. Your plan should be a tool used to work towards your individual goals. It should be a living, breathing document that will adapt and change with your financial needs. A financial professional can provide guidance and support every step of the way, as you build your financial pyramid—block by block.

Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments and insurance. McBeath Financial Group’s Technology Empowered Advisor Method (TEAM) is a financial planning process that integrates the personal touch of a relationship-based advisor with high-tech software tools to assess a client’s current portfolio and then analyze options from a variety of financial vehicles. Phone 309-808-2224 or email for appointment information.

Advisory services are offered through McBeath Financial Group and Motiv8 Investments, LLC. McBeath Financial Group and Motiv8 Investments, LLC are not affiliated. Insurance products and services are offered through McBeath Tax and Financial Services, LLC. McBeath Financial Group and McBeath Tax and Financial Services, LLC. are affiliated.