Military Discounts Local Info & Discounts Air Force Army Coast Guard Marine Corps Navy Moving Tools Military Education Center Military Travel Center Find Military Answers

 Installation Search

The Financial Pyramid

Setting your sites on a solid structure



By J.J. Montanaro
For decades, the food pyramid has been a part of children’s health education. While today’s USDA food pyramid has evolved dramatically from the iconic design of the past, the concept remains deeply ingrained in the minds of many. The visual tool continues to deliver important foundational lessons in healthy living.
What about our financial health? Borrowing from the food pyramid, a financial pyramid could lead toward creating a framework for financial success.
A Solid Foundation
A recent USAA survey on car-buying habits indicated the vast majority of car buyers spent months preparing and researching their automobile purchase. What if the average family spent as much time mapping a plan to achieve their financial goals?
When was the last time you sat down and discussed specifics around your financial goals? Those goals should have specific times and price tags attached—not just vague statements of intent. Once you know where you want to go your financial plan can tie together the various tools—insurance, employee benefits, legal documents, or determining how to allocate your investments —creating a roadmap to achieving your financial dreams.
Everything that follows should be a part of, or at least considered, in your plan, however, with no plan you may very well be on a destination to nowhere.
Protecting What You Can’t Afford to Lose
While robust doses of fruits, vegetables, and whole grains can ward off catastrophes on the health front there are also tools designed to help do the same on the financial front.

Related Articles: Resources: Money & The Military

Military Life Insurance

5 Secrets to Tackle Your Fear of Investing

Financial Planning Pyramid - Ask June

Insurance is not a dirty word. Often elections at work represent the majority of a family’s insurance protection—from health to life and disability. While this may be adequate, life events, big and small, (a new baby, home, career, car, retirement, etc.) should trigger a fresh look at your entire insurance package—and if you haven’t scrubbed it all before, consider this a reminder.  
Life insurance calculators at the VA website or can help you determine if you have the right amount of life insurance. Your liability insurance on your homeowner/renter’s and auto insurance (referred to as bodily injury) should, at minimum, cover twice your net worth. Medical insurance should be a major consideration during transition to or from jobs or careers. Your auto coverage also includes property damage coverage. If you’re at fault and the damage to property (for example, fences and other cars) exceeds your coverage you’ll be on the line for the rest—$100,000 is a good rule of thumb for minimum coverage in this area. Whether it’s disability coverage, long-term care, or even your auto coverage remember: life event means re-assess.
In addition to insurance, make sure you’ve got a legal plan in place in the event you die or are unable to make decisions. While this part of your financial plan could be fodder for an entire article and is the subject of many books, at a minimum you should have up-to-date wills, medical and financial durable powers of attorney, living wills, and a letter of instruction. The last is not a legal document, but rather a simple list of where you have accounts, key points of contact, and specific wishes you might have. Again, these documents should change and be updated as you and your financial situation evolves.
Harnessing What You’ve Got
Making the goals established in your plan a reality is, in large part, about building the right mix of savings tools and investments. There are four fundamentals that should serve as the cornerstone for your investment plan:
Diversification. The adage about not having all your eggs in one basket still holds true. An appropriate mix of various stocks, bonds, and cash is at the heart of diversification. In today’s topsy-turvy market a diversified portfolio should also probably contain guaranteed investments, exposure to commodities and inflation-indexed bonds, and certainly exposure to emerging markets—investment in these countries, while still risky, offer investment in places with relatively small deficits and debt and large growth potential.
Risk tolerance. The last few years have taught us that the concept of risk is only partially captured by the notion that investments go up and down. Risk means you could lose substantial sums—and maybe at the wrong time. don’t let any financial guru, insist you must be invested in this or that percentage of stocks. Build your plan based on your own comfort zone. You may choose a conservative approach—just make sure your plan incorporates expected investment results that match your portfolio.
Time. Your timeframe should play a key role in how you save and invest. Next month’s mortgage payment should never be in the stock market. For that matter, neither should next year’s car down payment. Short-term horizon goals like an emergency fund or next year’s vacation should be invested in investments that are stable and liquid. When goals are farther out, you can begin to roll-in stocks, bonds, and other investments that don’t offer safety and stability.
Taxes. Tax consideration should be incorporated into every investment decision. Should you take advantage of the tax-deferral and potentially tax-free withdrawals offered in a 529 College Savings Plan; use Roth IRA, Thrift Savings Plan, or some combination? Consider building a tax-diversified portfolio. A solid portfolio that offers current tax benefits (Thrift Savings Plan contributions that reduce taxable income), future benefits (tax free Roth withdrawals), and flexibility (no-strings attached non-retirement accounts). This type of approach will give you options, regardless of what happens with taxes and tax rates.
Keep your hands on the wheel
Automatic and systematic investments are a smart way to make sure you are taking the necessary steps to save and invest to achieve your goals. However, don’t just put your overall financial plan on auto-pilot. Invest in the TSP via payroll deduction, add money to your emergency fund each paycheck and add to Johnny’s or Jane’s college fund each month but, don’t forget about periodically reviewing where you stand. Goals may change, markets will change, and your financial situation requires things be updated and amended…so make sure your plan is keeping pace.  
Like the food pyramid, the financial pyramid can give you a solid framework to build from—making sure you have your bases covered when it comes to your finances.


More Great content:

Find Military Discounts in your community

You have Questions? We have MilitaryAvenue Answers!

Our Letters to You,'s Military Family Blog

Subscribe to MilitaryAvenue Alerts, monthly military-discounts & incentives right to your email box: Manage Subscriptions

The Reading Room, full of relevant news related to the military family

Moving Tools, Our Moving and Relocation Tools for Military Families



Proud Sponsors

My Account

Social Media
* Share This Article  
* The appearance of hyperlinks to other sites does not constitute endorsement by of that site or the information, products or services contained therein.

Military Tools