In both chess and investing, a large focus is put on protecting your most important pieces, or core assets. These are the pieces (or financial assets) that are crucial to your success.
In chess, the king is the most important piece on the board. When he is lost, the game is over.
To prevent this from happening, many players will castle. Castling is a chess move that allows you to switch the location of your king and rook. (To see an example of castling, watch this short one-minute clip.) The king’s new location on the side of the board grants him extra safety from enemy pieces. Similarly, in the finance world it is crucial to make sure all of your core assets are safe in order to protect your family’s security. (Click here for a free download on how to plan for retirement and protect your family’s financial future.)
Here are three of your most important financial assets…and some practical ways to safeguard them:
Core Asset: Retirement savings
Protective strategy: Protect retirement savings from taxes as long as possible.
Retirement savings are a crucial asset for your future retirement. The two most popular retirement savings accounts are IRA or 401(k) accounts. This is because they are tax-deferred, meaning that the money in them is not taxed until you withdraw it.
Core Asset: Your earning ability
Protective strategy: Protect your family with insurance.
Your ability to earn money is your household’s most important asset. As your family’s survival depends on you, it is your responsibility to make sure there is an alternative source of income coming in, if you are no longer able to work.
In case of an unexpected accident or sickness, disability insurance is critical, too. Maximize your disability insurance as much as you can to cover your family’s basic needs. (Insurance companies don’t give 100% disability insurance, because they want to make sure that it won’t be more worthwhile for someone to be disabled over being healthy.)
Make sure you have a life insurance that will provide enough coverage to support. You may want to consider a life insurance policy that will provide sufficient funds to support your spouse throughout his or her retirement, and your children until they are self-sufficient.
Core Asset: Your money after retirement
Protective strategy: Be able to pay the bills for the rest of your life.
Your money’s safety and security are even more important after retirement, since your paycheck ceases and you have to make sure that pensions and savings will last for the rest of your life. Therefore, after retirement, don’t expose all your money to the risky stock market. Rather, make sure you have enough money in safe investments (like quality bonds or bank deposits) so that you can pay your bills and support yourself for the rest of your life. You can become a little more adventurous with your investing once you are sure you have enough money put aside to cover your needs.
In life, as in chess, there are no second chances. Therefore, make sure you protect your core assets so that you can take care of yourself and your family as best you can.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial Planner (CFP®).
