The Financial Planning Pyramid


Financial planning is a comprehensive ongoing process which encompasses your current finances, your financial goals and the strategies you’ve set to achieve those goals.

The foundation of any financial plan is ‘PROTECTION’. This is the stage where you cover the most basic risks which could affect your overall financial health. In this level, the focus is on cash flow management, income protection (emergency savings), reduction or elimination of debt (debt-free living), and insurance policies (life insurance, health insurance, etc).

WEALTH CREATION AND ACCUMULATION is the next stage after protection. Many concentrate more on this stage without realising that wealth accumulation without wealth protection may prove very costly when life throws us curveballs. This level is all about making money and multiplying money. Investing, asset allocation, retirement planning, and long-term savings goals fall within this bracket.

DISTRIBUTION of wealth closes off the pyramid. This level has to do with the gratifying task of passing on wealth to posterity. Will, trusts, and estate planning fall within this bracket.

So where are you on the Financial Planning Pyramid? Have you created a sound financial plan incorporating all the above blocks? Can you say that you have adequately covered the base of the pyramid (Protection) before going to the next level? Are there areas that still need attention? What are they?

In case you've missed out any of the process within a block (e.g. a robust emergency fund, retirement planning etc), you still have time to kick-start the planning before this year ends. Do all you can to finish this year strong - ending the current year strong will help you start the next year strong.

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Categories: Financial Planning
Oyenike Adetoye

About Nike

Oyenike Adetoye (aka Nike) is an impactful speaker, author and personal finance expert. A Chartered Management Accountant by profession. Nike is the founder and CEO of LifTED Finance, a private financial firm that educates, coaches and supports people on their journey through financial fitness and wealth management.