To create wealth is the first challenge. To manage, maintain, and grow that wealth is the next challenge. This is why some people were millionaires at once but lost everything through high spending and improper wealth maintenance. There is no single strategy that works in all situations.
However, there are several potential strategies that, when applied, can assist in managing wealth. Here are the wealth management strategies you will hear about amongst wealth advisors, investment advisors, and financial analysts.
Strategy #1: Set and Define Financial Goals
Wealth management is not a casual affair. It’s not done without excellent awareness of how much a person has and where they hope to go. Financial goals should be short-term and long-term. Be specific. Make your goals attainable and realistic, and set them on a deadline. This will help guide your wealth management approach.
Strategy #2: Hire Wealth Management Professionals
Some financial advisors work hard to educate themselves specifically on wealth management and with years of experience. These wealth management experts can identify what approach suits best. They will help manage everything, from investments to spending.
Strategy #3: Reduce Tax Liability with Advanced Planning
As you move to maintain and grow your wealth, taxes come into play. This is wealth you’re more or less giving up to the government at a maximum if you don’t have someone with the knowledge of how to properly structure moves to minimize taxes owing.
There are many ways to reduce tax liabilities, such as tax-loss harvesting, selling investments at a loss to offset capital gains, and using government-supported tax accounts.
Strategy #4: Work Out a Spending Budget
Wealthy people tend to have higher expenses. It’s even more important for wealthy individuals to learn to work on a budget. It may take a few months to get the exact numbers down.
However, set aside specific amounts for necessities, play and entertainment and the things you like to do. Then, stick with it. One doesn’t need to cut off spending or not have fun with their money to manage wealth, but it’s important to have limits.
Strategy #5: Clear High-Interest Debts Quickly
Alongside higher expenses often comes more debt. High interest on debts will take and take from your wealth. Debt also interferes with creating more wealth. Never borrow more than you can; work hard to repay your debts or acquire as soon as possible.
Understand your debts and how they affect your goals, and consider eliminating unnecessary debts or assets acquiring debt if they aren’t relevant to your future wealth goals.
Strategy #6: Diversify Your Investment Portfolio
Don’t put all your wealth in a single place and expect it to grow. Diversify. This limits exposure to loss in any single investment and reduces the impact of risk events. Consider a little in the stock market, a little in real estate, a little in businesses, and a little where it makes sense.
Allocate different assets according to your investment objectives. Speak with a wealth management advisor for more guidance on how to build and actively manage a portfolio so that you’re always growing what you have.
Strategy #7: Consider Your Risk Tolerance
There is always a risk when you invest or carry wealth. Identify and be aware of the potential risks. Take steps to mitigate risk where you can. This may involve the use of insurance hedging or similar wealth management tactics.
A high-risk, high-reward portfolio is not necessarily the type you want to carry if you’re focused on maintaining and managing wealth. A low-risk, steady-reward profile is arguably the smartest to maintain.
Strategy #8: Estate Planning Is Important
Estate planning is how wealth is distributed upon a person’s death. Especially if family wealth is being managed, estate planning will ensure assets are being transferred to the desired beneficiaries.
In addition, funds are being allocated and spent by the correct parties and in the preferred manner. This is also a strategy to reduce potential costs or debts that could be transferred to others upon passing.
Strategy #9: Education Planning May Be A Part
Helping a child or grandchild with future education expenses requires planning, registration of specific accounts, and setting up a defined strategy years before.
Education planning can also involve setting aside funds for you or another family member to return to school, be trained in a new field or obtain new knowledge, and ultimately not worry about tuition or costs limiting one’s career education.
Strategy #10: Philanthropy and Charity Donations
Many wealthy families and wealthy individuals prioritize philanthropy as an element of wealth management. If you don’t already have a charity you work with, are passionate about, or don’t know what you want to do in the charity, give it some thought.
Establishing a charitable trust or foundation is a grand option, but this can be as simple as making tax-friendly charitable contributions to organizations you trust to use the money wisely.
