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Protecting Your Wealth – A Balanced Financial Life

As we conclude our series on protecting your wealth and financial well-being, we are taking a deep dive into the importance of balancing your financial life. In order to protect your hard-earned wealth, it’s not enough to rely on risk management and a good insurance mix: you must balance your financial life entirely.

One of the most important aspects of financial balance is determining your lifestyle burn rate. Any financial choice you make that has the potential to incur debt should not remove your ability to remain in financial balance. You should still be able to save 15% – 20% of your income and maintain your core liquidity (3-6 months of income in cash, 6-12 months of income in near-cash reserves.) Those new debt payments must fit in as part of your lifestyle. If a decision you make negatively impacts your ability to maintain one of those things you are out of financial balance and the payment exceeds your lifestyle budget.

Other key guiding principles for maintaining your financial balance include:

Property and Casualty Insurance

These are important for covering the replacement value of your assets. You also want to ensure that your assets are protected if you are found to be at fault in a major accident. Do you know what amount your are responsible for versus your insurance’s responsibility? Review your policies and make sure that you can cover the terms within. If not, it’s time to shop around for a new policy with a premium and deductible tolerable for you.


You should actively be saving 15-20% of your gross income annually. Any less than this can mean missing out on millions over the course of your lifetime. You should have this amount spread across an emergency fund, liquid savings, investments, and retirement funds, each with their own financial model and game plan guiding them.

Short-Term Debt and Short-Term Capital

Any short-term debts you take on should fit into your balanced lifestyle burn rate. Zero short-term debt is preferable, but you should rebalance your lifestyle plan if short-term debts are necessary. You should also have 6 to 12 months of expenses in liquid or near-liquid assets in case of emergency or disability. Doing so will cover you in case of unexpected gaps in pay or other unforeseen emergencies.

Mortgage Size

Are you the type of person who wants the biggest, nicest home on the block? If so, make sure that your mortgage fits into your lifestyle. A good rule of thumb is that your mortgage payments should not be bigger than 15% of your gross income.

Prematurely Funding 401K

While 15% to 20% of your gross income should be saved annually, you should avoid pumping too much into your 401K and other qualified retirement accounts. These funds are effectively locked away and carry stiff penalties for taking early distributions. You should never have more of your money out of your control than in it.

Net Income

Are you living a budgeted lifestyle? Or are you lying to yourself about cash flow challenges? Saving religiously and spending the rest on your lifestyle is the first step towards balancing your finances. Be honest with yourself about where your money is and show the discipline to live within your means.

Want to get a clearer picture about balancing your financial life? Complete this questionnaire to get started with us.


There are many other areas to consider but most people ignore these. If you need help designing your plan for retirement or just a second look, we’re happy to help.

Jumpstart YOUR knowledge of all the major wealth eroding factors by downloading our FREE e-book today:

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