The Four Financial Spheres
We have identified four main financial areas, or financial spheres, which have to be in balance in order to best achieve your financial objectives. The balance between these spheres changes according to:
- the objective itself,
- the timeframe over which it is to be achieved and
- where you are with respect to life’s journey.
- Cash Reserves: A specific reserve of money for immediate needs to meet an emergency or take advantage of an opportunity. It is always cheaper to 'borrow' from yourself than from somewhere else! This is part of the money you use for daily living.
- Interest-Earning Investments: Money invested where the main objective is interest, with an emphasis on stability of the original capital. This is the part of your portfolio best suited to shorter term aims and objectives where the capital growth will be reduced – but so will the investment risk.
- Equity Investments: Equities are used to provide growth potential and also to hedge against inflation. However, they can fluctuate in value and are therefore best suited to your longer term aims and objectives. We carefully balance these to suit your individual attitude to investment risk and timescale.
- Adequate Protection: This deals with the financial implications that could result from a premature death or a prolonged disability, where your potential to earn an income is threatened. This is money to replace the things you treasure and cannot afford to lose. We call this Adequate Protection because, whilst it is vitally important, there is no point spending more money on insurances than you need to.
Whether you are working or retired, a family or a business, your financial security and future plans depend on these four financial spheres of influence being balanced to suit your circumstances.
When constructing a personal money-management strategy for you we will strike the appropriate balance between these four areas – and clearly explain how they work together.
The balance of these four spheres will change over time, as you progress through life as well as in-line with the general economic environment. Our on-going services will keep you abreast of these changes in order to maximise your return.