Opinion | Protecting cash-flow capability | Brad Ferguson

MIND GAP: Protecting our capacity to generate cash flow is crucial to wealth creation.

MIND GAP: Protecting our capacity to generate cash flow is crucial to wealth creation.

When we put plans in place to create wealth or achieve financial independence most people realise the importance of using cash flow to accumulate assets that will grow into the future.

What is not always at the front of people’s minds is the need to protect the capacity to generate the cash flow, and this is obviously a highly critical part of the wealth creation equation.

If our ability to earn income is taken away, all those plans for a comfortable retirement start to look very shaky.

Something that is surprising is the fact that some people will happily insure a $30,000 or $40,000 motor car, but not their ability to earn a salary or work in their business, even when the lost income earning potential is in the millions over their remaining working life.

This can only occur as a result of a lack of education or as a result of a bad experience in the past.

Either way, it is a failure on the part of the financial planning profession.

We need to be better.

The best way to look at life, total and permanent disablement, trauma and income protection cover is as instruments to fill a gap.

When we sit down and establish goals, generally there is a gap between where a person is now and where they want to be. So, the covers listed above come into play to ensure that if someone gets sick or injured tomorrow, part or all of that gap can be filled so that the goals are still achievable.

The idea is that, as the gaps are closed, the need for insurance diminishes and we move into the area where goals are being achieved.

And that’s the fun part when we can enjoy financial independence and work becomes a choice. 

Brad Ferguson

Managing director,

Newcastle office of

Bell Partners Wealth Creation & Financial Advisory

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