Pillars of Investment – Building a Strong Financial Foundation

To have financial freedom and create generational wealth, a strong financial foundation must be built. This is done by investing.

To invest is to set aside a portion of your income/time in expectation of greater value/benefit in the future.

There are four pillars of investment required to build a strong financial foundation:

Pension Plan
A pension plan is an arrangement that provides pension benefits to its members or to the beneficiaries of its members. This is mentioned first because in Jamaica we have the opportunity to contribute to an Approved Pension Plan before any income tax and other statutory payments are taken from our income – whether you are an employee who gets a salary or an entrepreneur who generate your own. We don’t know how long we will live, and a pension plan is designed to provide you with income for life.

Insurance
Insurance provides protection from financial loss that can be caused by a possible eventuality. Simply put, it can provide money in case something bad happens. There are various types of insurance, however some of the most important ones to generate and maintain lasting wealth are those that cover your life. These include, health insurance, critical illness insurance and life insurance. Health insurance covers medical expenses ranging from a doctor’s visit to major life saving surgeries. Critical illness insurance can provide a lump sum upon diagnosis of a sudden/severe illness, for example a heart attack or cancer. Life insurance provides a benefit upon the death of the insured person. This type of insurance is essential if you have persons who depend on you financially, especially if they are not able to generate an income on their own.

Investment Assets/Products
These are the holdings that we most often think of when referring to investments. These can range from a regular savings account to stocks and bonds to real estate and hedge funds. There are a wide range of investment products that are available depending on your goals, the amount of money you have and your ability to take and manage risks. An investment product is one of the main ways to provide or supplement funding the goals you’ve identified when making your budget.

Yourself
You are and possibly forever will be your best investment. Investing in yourself involves developing your knowledge or skills to enable you to generate income not only for an immediate benefit but to enable you to invest in all the pillars mentioned above. One of the best things about this investment is that it can often be implemented with little or no cash. This right now is an investment in yourself – learning how to create and maintain wealth. The time spent reading this can empower you to take the necessary steps to implement these or to take the time to evaluate if these investments are being maximized.

If you do not have or are not working towards making these investments, I encourage you to start doing so now. It’s never too late.

“The best time to plant a tree was 20 years ago, the second-best time is now.”
Chinese Proverb