Help Protect Your Standard of Living

Money Talk

Roni M. Benjamin, Finance Editor

What can you personally do about the nation’s debt, higher interest rates, outsourced overseas jobs, corporate greed, and political scandal? When you pay too much attention to national or international economic news, you can find yourself making decisions that don't make sense for your particular economy. What matters is managing your economy and stabilizing your financial well-being for you and your family. 

Economists typically measure a person’s standard of living in the following degrees: luxury, comfort, getting by, bare necessities, and charity. Regardless of your level of wealth, comfort, needs, or material goods, two things affect your current standard of living: Income and Assets. If you were to lose your income, will your assets sustain your lifestyle, or will your quality of living roll downhill from comfort to bare necessity? It’s not always easy to ask yourself these questions. Sometimes it means admitting that you made a mistake or that you’re failing at handling your affairs now. Nevertheless, taking personal inventory of your relationship with your money and the obligations of your household is a great place to start. Let’s explore some other factors that could put pressure on your standard of living:

Disability rates increase due to population aging and increases in chronic health conditions, among other causes. Almost everyone is likely to experience some form of disability, temporary or permanent, at some point in life. A disability can affect how much income your household receives.

Income Taxes certainly impact economic growth in your home. When your income level changes, so do the amount of taxes you pay to the government. 

Retirement is the point at which a person chooses permanently to leave the workforce. Most Americans retire between ages 67 and 75 and live off 60 percent of the income earned during their working years. 

Death in a family can profoundly affect a person or family members for an extended period. The emotional stress caused can impact one’s ability to work or focus at school. In addition, there are financial burdens the family may face because of loss of income. 

Inflation means your savings and fixed income lose purchasing power as time passes and the cost of goods and services goes up. For example, if the average annual inflation rate is three percent over the next twenty years, it will cost you $181 to buy the same items you can buy today with $100. As it pertains to purchasing power, this means that $100 today will be worth only $55.37 in twenty years.

Consider the following to provide a “wedge” that will help allow your family’s standard of living to stay in place no matter what happens:

1.     Ensure you have disability insurance that you own independently from your employer to help supplement your income during your disability period.

2.     Include tax diversification ideas into your investment strategies. The strategy of tax diversification can be used to help build wealth now and in the future. It’s a strategy that considers a variety of investment accounts you will eventually use for income after you stop working. A tax-efficient withdrawal strategy coupled with tax diversification could help your assets last longer in retirement and help you build wealth.

3.     Your retirement plan should consider the following risk: unexpected personal events, long-term medical needs, financial needs to cover expenses, travel and outstanding liabilities, changes to Medicare and Social Security. Giving thought to such factors will allow you to create a lifetime of income with your retirement plan.

4.     Death is never a comfortable conversation to have. However, if the worst should happen and you don’t have your financial affairs in order, you’ll leave your loved ones with an emotional and financial burden. Consider life insurance to cover lost income after you die. A good rule of thumb is to have enough life insurance to equal ten times your annual salary. Speak with your financial professional to find the right coverage. 

5.     The most powerful way to protect from inflation is to increase your earning ability and income. A five percent annual raise, or a promotion that nets you a twenty percent gain, will combat inflation. Consider certifications and higher education to help increase your earning potential and consider investing in the stock market—specifically, investments that hedge against inflation.

I am a financial services professional committed to helping individuals and businesses build a solid financial house and leave a legacy for their children’s children. We would love to talk to you about your specific goals, help you construct your unique economy, and protect or improve your standard of living. 

Roni M Benjamin

Call or text (770) 685-5532