Protection, Accumulation and Distribution
An efficient financial planning structure involves three basic concepts: protection, accumulation and distribution. To make this clear, I usually draw a pyramid and make an analogy with building a house. You need to start with the foundation so that the building can stand on its own.
Those who manage to organize these three pillars in their family and business are one step ahead of achieving long-term financial success.
Protection
Protection is at the base of the pyramid and should be seen as everything that can go wrong in life, i.e. premature death, disability, accidents and other problems along the way. At this layer of the pyramid, we are concerned with creating all the insurance structures for the problems mentioned above, in case the worst happens, including the issue of wills, which is normally not in the plans of the Brazilian community.
Accumulation
The layer in the center of the pyramid, where the word accumulation is, refers to the period of life that begins when we enter the job market and ends when we retire. In this part of the pyramid, everything related to wealth accumulation will be here, such as fixed and variable income investments, various types of investments, personal and commercial real estate structures, and opening and growing businesses. In this layer, each person will have a different profile for choosing the most appropriate investments.
Distribution
Finally, at the top of the pyramid, we find distribution. The American's concern is to make sure that he will not outlive his money and that what he has accumulated throughout his life will sustain him until his last day. At this stage of planning, the focus is obviously no longer on accumulating wealth, but rather on having a return that will sustain him. This is the stage in which the succession of assets is planned, where what was not used during his lifetime can be transferred to his beneficiaries in the most effective way possible, within the parameters of the law.