Every saver and investor should view their capital as a resource in service of their quality of life: a means to support their goals, ensure peace of mind for themselves and their loved ones, and live with greater awareness.
However, it is common to see asset allocations that are not aligned with real personal or family needs. Without a structured financial plan, there is a risk of relying on improvised advice, attractive commercial offers, or decisions driven more by emotion than by strategy.
The truth is that no goal is achieved by chance: it takes method, vision, and a structured approach.
A fundamental first step is recognizing that our needs change over time: some are immediate, others are long-term. Not all money should be treated the same way. It must be organized into distinct areas, each with a specific purpose.
We call them “areas of need,” and there are six of them:
- Protection – to safeguard yourself, your family, and your wealth;
- Liquidity – to manage daily expenses;
- Reserve – to handle major contingencies or short- to medium-term opportunities;
- Pension planning – to build a peaceful future;
- Investment – to grow capital over time in a way that aligns with your goals;
- Extra return or speculation
1st Area of need: Protection
At the core of every solid financial and wealth planning lies protection. It is the number one area, the foundation on which everything else is built: without adequate coverage against life’s major risks, any investment or wealth growth strategy is at risk of becoming fragile, exposed, and ineffective.
In Italy, this area is traditionally undervalued due to a historical distrust of the insurance sector and a lack of risk awareness. However, neglecting it means exposing oneself to events that can erode, partially or entirely, the wealth built over a lifetime.
Our existence is constantly subject to unpredictable events: accidents, illnesses, loss of working capacity, death. And our material wealth is also exposed to concrete risks: accidental damages, civil liabilities, natural disasters, professional disputes.
This is why we recommend allocating part of your resources to building adequate insurance coverage, according to a priority scale:
A) Permanent disability due to illness or injury – An extremely important protection, of absolute priority. Losing the ability to earn income permanently means not only facing personal expenses related to assistance, but also putting in financial difficulty all those who depend on that income. An essential protection, especially when you are the only or primary source of support for the family.
B) Death coverage – A protection for your loved ones, to ensure they have sufficient income even in the event of tragic occurrences.
C) LTC (Long Term Care) Protection – Often underestimated, LTC protection should be considered a primary protection. This policy guarantees an immediate lifetime annuity in the event that, regardless of age, a person loses the ability to perform essential activities like bathing, dressing, or eating. It covers the costs of ongoing care (for example, to pay one or more caregivers) and, unfortunately, may prove essential even before retirement.
D) Health insurance – The public healthcare system, while efficient in emergencies, cannot guarantee timeliness and quality in all cases: private insurance allows access to fast and specialized care without incurring potentially prohibitive costs.
E) Daily allowance for temporary disability – A useful coverage for dealing with periods of absence from work due to illness or injury of limited duration.
Even the assets must be protected.
There are risks related to personal or professional liabilities, as well as extraordinary events such as Fires, theft, earthquakes, floods, or the consequences of legal disputes. These are essential coverages not only for entrepreneurs but for anyone who owns assets and wants to protect them.
In conclusion, allocating a small portion of one’s capital to protection is not a cost, but an act of foresight: it means giving up a fraction of returns today to prevent an unexpected event from irreparably compromising the entire wealth tomorrow.
2nd Area of Need: Liquidity
The second area to consider in sound wealth planning is dedicated to liquidity. This is where the amount needed to cover all daily and recurring expenses—both personal and for those who depend on us financially—should be allocated
The goal is simple but essential: to ensure full availability of resources to cover one year of foreseeable needs, without having to draw from reserves allocated to other purposes.
When calculating this liquidity, the following should be considered:
All incoming cash flows (salaries, pensions, commissions, annuities, rents, etc.);
All fixed expenses (utilities, recurring consumption, fixed costs, family obligations, etc.).
Funds allocated to this area should be kept in a current account that ensures maximum accessibility, even if it offers no return.
Allocating to this area amounts exceeding what is necessary for one year of expenses can be not only inefficient but also economically disadvantageous.
3rd Area of Need: Reserve
As the name suggests, the Reserve area is intended to deal with unexpected events that are not covered by daily expenses managed through liquidity.
It is the “reserve tank” of our wealth, similar to a car’s fuel reserve.
This reserve is meant to cover unexpected expenses, such as an urgent repair, the sudden replacement of a car, an unplanned trip, a requested advance, or any event that requires access to capital in relatively short time.
For this area, it is essential to preserve the availability and stability of the capital, avoiding risky or volatile instruments.
The most suitable financial instruments are:
- short-term securities, ranging from a minimum of one year to a maximum of three;
- monetary and bond instruments with low volatility and high liquidity,
- instruments that exhibit minimal sensitivity to changes in interest rates set by central banks.
The goal is not to achieve high returns, but to maintain readiness, stability, and accessibility, so that timely intervention is possible in case of need without impacting other areas of the assets.
4th Area of Need: Pension Planning
The Italian pension system is now structurally inadequate to ensure a decent standard of living for workers who will retire: those who do not start building supplementary pensions in time risk seriously compromising their financial independence in old age.
The Pension area is specifically aimed at bridging the gap between what will be received from the public or occupational pension and what will actually be needed to live with serenity and financial independence.
It is, in fact, an essential pillar of long-term wealth planning.
Fortunately, there are many solutions available to address this issue and build a solid supplementary pension aligned with one’s life goals.
These solutions, however, require a high degree of customization, as they must take into account each individual’s financial, fiscal, and insurance situation. For this reason, the support of an experienced professional is essential: we at Team Paperetti are here to help you identify and implement the most suitable path for your future needs.
5th Area of Need: Investment
The Investment area encompasses that part of savings intended to meet long-term goals, i.e., resources that should not be used for at least five years — ideally ten — so that the capital can effectively endure the natural fluctuations of the markets and generate real growth over time, capable of protecting purchasing power.
To achieve significant returns, it is essential to consider an equity component within the portfolio: equity markets, in fact, have historically proven capable of generating value over the long term, even through periods of volatility and negative years.
The key is to stay invested with consistency: downturns are often followed by significant recoveries, and with the support of professional management, it is possible to turn difficult moments into buying opportunities at more favorable prices.
Even the most concrete and meaningful life projects deserve to be supported by an appropriate investment strategy, such as purchasing a home or another important asset, leaving an inheritance to loved ones, supporting the university studies of children or grandchildren, starting a business for the benefit of future generations…
In other cases, investing simply represents the entirely legitimate desire to preserve and grow one’s wealth over time.
Conscious and truly effective investing is based on two essential pillars: patience and a long-term vision.
No one can predict market trends with certainty, but financial history has clearly shown that a disciplined approach—guided by well-defined goals and supported by professional management—is the most solid strategy for growing and preserving capital over time.
6th Area of Need: extra return or speculation
This last area undoubtedly represents the most risky and unpredictable aspect of financial planning, similar to a bet at a casino.
Allocating part of your capital to speculative investments can be a legitimate choice, but it is essential that this amount is limited to what you are willing to lose without compromising your overall financial security.
Do not blindly follow the promises of experts or analysts who “predict” market movements: no one, regardless of their experience or expertise, can predict with certainty how the markets will evolve.
Speculation is by nature a game of intuition and timing. If luck is on your side, the gains can be significant—but so is the risk of losing everything you’ve wagered.
We have examined the six key areas to keep in mind when planning and managing your capital: protection, liquidity, reserve, retirement, investment, and speculation.
Each area plays a crucial role in building a solid and personalized financial strategy.
We at Team Paperetti are here to guide you through this process, helping you choose the solutions that best suit your needs and goals. With the right planning, we can build a secure and prosperous financial future together.