What are yours?
The figure above is taken from the book The New Retirementalityby Mitch Anthony. It is a financial adaptation of the famous Maslow’s hierarchy of needs where the bottom rung of the pyramid represents our most basic human needs (in Maslow’s model this is food, clothing & shelter).
Mitch has adapted this model to a financial planning context, and it is useful to spend some time contemplating your survival income (the absolute minimum amount you would need to survive each month). It’s probably a lot less than you think, and will provide some direction with respect to how much insurance you actually need or what would happen if you got retrenched.
The next step up is the safety income that prevents you from getting into survival mode – this is effectively the role of financial planning, and would include an emergency fund as well as things like disability income replacement, severe illness cover and medical cover.
More and more financial planners are recognising the importance of the “blocks” above this as well, as they attempt to help clients live the quality of life they are seeking.
It is not just about the money!
(Gregg Sneddon , Health24, March 2011)