Over their financial lifetimes, almost every government, business, and household encounters a cash crunch – expenses exceed income. There are only two solutions to this financial dilemma: growth, so that income once again exceeds expenses, or austerity, so that expenses are adjusted downward to be less than income. If you ask economists, the majority will say that, in the long run, growth is the only legitimate solution. Cutting expenses is a finite strategy; there’s a limit to the expense that can be trimmed from the budget. On the other hand, growth is potentially infinite – who knows how great revenues, profits and income might be?
Imitation may be the sincerest form of flattery and often a template for those who aspire to achieve the same status. If you want to be an ultra-marathoner, you train like one. If you want to be wealthy, you consider how to emulate their behaviors and habits. You may decide to become an expert in your field, start a business, or copy their asset management strategies. And you might want to own life insurance.
Lifespan has increased substantially in the past century, causing sea changes in social and financial norms. Longer lifespans skew the demographics between workers and retirees, affect the viability of government benefits, alter the time frames for work and retirement, and present a different set of health and lifestyle challenges compared to previous eras. But even as life expectancies keep inching up, it is also accurate to say people are not living longer.
The essential advantage of life insurance in estate planning is the guaranteed liquidity it provides for a future event (death), whenever it happens. In the past, large estates may have earmarked the proceeds from an insurance benefit to pay taxes, ensuring that other, more valued assets (such as homes or businesses) did not have to be sold to satisfy the bill. But apart from federal estate taxes, a permanent life insurance program can be used in a variety of ways to optimize the transfer of valuable assets to future generations.
Planning for any future event can be daunting, but especially when it’s in an area where you don’t have much knowledge or experience. If you know almost nothing about physical training, are 20 pounds overweight, and don’t run any further than the distance from your couch to your kitchen to keep a pot of nacho cheese from burning on the stove, is it a good idea to a start a fitness plan by completing an entry form for a triathlon scheduled five years from now?