What is my most valuable asset?
“My house”
“My car”
“My super”
“My portfolio”
“My memories”
Ask five people the same question as I did and you will get five different answers. But for once in life I believe there is one correct answer and that is your INCOME.
Whilst many of us love our jobs and arrive every Monday morning with a spring in our step and a smile on our face the reality is that the base level motivator that gets out of bed is the need to earn income to pay bills and, hopefully, enjoy life.
Some may argue that their car is their most valuable asset as it is what gets them to work in the first place; without income how do they put petrol in the car or pay the rego’ and insurance?
Some would argue it is their house; without income how do they pay rent or make mortgage, rates and maintenance payments.
Without income we can’t build our super and investments and without income we can’t have the wonderful adventures that create those lasting memories.
A 35 year old earning an annual salary of $40,000 will generate more than $2,000,000 of income over the course of their working life (to age 65 with an annual inflation linked increase of 3.5%pa). Typically this person will insure their car and their house and their possessions but not the one thing they have that drives their lifestyle (and actually puts money in their pocket rather than taking it out) their INCOME! (See below figures provided by MLC)
Income protection can pay you a monthly benefit of 75% of your income, potentially up to age 65 if you are unable to work due to illness or injury. It can remove the financial concerns of the family’s day to day running costs if you cannot go to work and generate your normal income.
The premium can be paid from cash flow and allow you to claim a tax deduction for the cost, or you can utilise your superannuation fund to pay premiums and so not impact the household budget.
If we have lifestyle goals of owning a nice house and driving a nice car, if we want to plan for a secure financial future through super and non-super investments and collect wonderful memories along the way, then it is an imperative that we protect what is truly our most valuable asset.
With tax effective options for paying the premiums the reality of not having appropriate cover could easily prove a lot more expensive than putting the protection in place.
By Gareth Daniels, Associate advisor
Income Solutions Financial Planners
Please note: The advice on this site is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information
