Investing Unit 1: Building Blocks

  • Introduction
  • Unit 1: Basic Building Blocks of Successful Financial Management

Basic Building Blocks of Successful Financial Management

Investing is an important part of the financial planning process. Yet, information overload and busy lives make managing finances successfully a challenge for almost everyone at some point. This unit is designed to help you understand the basic building blocks of sound financial management–the steps you need to complete, or at least consider, before you begin an investment program.
Visualizing the financial management building blocks in a pyramid (Fig. 1), the wealth protection blocks on the bottom of the pyramid form a strong, secure foundation and provide crucial stability for the wealth accumulation and distribution blocks on top.

Each building block relies upon the strength and stability of the personal finance strategies used in the blocks below it. Decisions for one building block may have a definite impact on options available in adjacent blocks. For example, if you overuse credit, you may not qualify for a mortgage on a home. As you move up the pyramid, your financial life becomes more complex. This complexity, along with changes in your life, may require that you re-evaluate and change earlier strategies. Working from the bottom to the top of the pyramid, we will discuss 11 key components of a successful financial plan that make up the blocks of the pyramid. We will discuss, in turn, the components of wealth protection, accumulation, and distribution.

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