Chapter 2 The Financial Plan – We examined the fourth component which is developing a plan to manage your risk. This risk is related to the likelihood of financial loss due to a car being stolen or a house or boat being damaged. We learned that this is why we purchase insurance. We determined the need and financial liquidity needed for purchasing asset, medical, and life insurance. We learned about the fifth component which is a plan for investing. We looked for the balance between investing to increase earnings and our need for liquidity. We learned that different types of investments have different levels of risk. The riskier the investment the greater the return.