Introduction
Balancing between a 9-5 job and planning to park funds into an investment portfolio for wealth management can feel like a tight-rope walking indeed.
You may have to spend funds on your kid’s tuition fees, run errands for groceries, or spend your paycheck on weekend getaways. This way, how much ever you earn doesn’t seem to get the better of you. And then comes the time for the next paycheck.
Doesn’t this vicious cycle continue with most of us? Yes, it certainly does!
On this note, helping you understand why you must make wealth management your top-most priority and outline 8 wealth management tips for beginners.
What is wealth management- Meaning and Conceptualization explained
Wealth management encompasses a systematic set of principles that are aimed at helping you achieve your financial goals and aim for wealth generation seamlessly.
A systematic and disciplined approach is mandatory to save up funds to pave the way for financial independence and freedom. Only when you follow the principles of money management can you achieve what you want in life!
Therefore, wealth management refers to a set of principles aimed at the creation of healthy and robust investment portfolios for investors so that you generate a substantial amount of wealth basket over the years that can help you take care of your long-term goals like education planning, tax planning or even take care of your retirement goals in a precise and streamlined manner.
To help you achieve wealth generation on a comprehensive note, you have two types of approaches to look at it:
- To approach a wealth management firm
- Get in touch with an independent wealth manager or investment advisor who has decades of experience helping clients achieve their wealth-generation goals.
Importance of wealth management in today’s world
Wealth management is the need of the hour amongst Gen Z millennials for the following reasons. Highlighting the importance of wealth management in today’s world:
- Achieve financial independence and freedom
Wealth management techniques are so precise that they help you achieve financial independence and freedom. You manage with a smaller dosage of savings and that can add up to something big on a long-term rally.
Therefore, when you aim to create wealth baskets you achieve financial independence and freedom as you can take vacations, get yourself your brand-new dream car, and do so much more.
- Combat inflationary changes
You can combat inflationary changes seamlessly when you have a robust investment portfolio that is growing the wealth basket for you.
Therefore, inflationary or interest-rate changes due to the volatility of the market need not worry you anymore as you have a solid income-generating portfolio that takes care of your purchasing power on the whole.
- Staying ahead of your game
Due to economic downturns or even a recession that is on the cards, many people receive pink slips from their employment organizations. And, this is a potential risk for today’s millenials.
However, as a wealth-protected investor, you need not worry about losing a job as you have been saving up for the rainy day in terms of choosing a wealth basket that grows at a steady pace. Therefore, you can stay ahead of your game even in the face of adversity.
Top 8 wealth management tips for beginners
Coming over to the main crux of the online blog outlining the top 8 wealth management tips for beginners. Helping you get started here:
- Goal setting
This is the first and foremost strategy you must take with respect to wealth management. You must create a cheat sheet that encompasses information on how much you earn, what immediate expenses you have to take care of, and the money you are ready to bifurcate towards your investment portfolio. This is a goal setting you establish before you start building your investment portfolio.
| S No | Income earned | School fees | Rent/ food, groceries, and buffer | Savings for investment |
| 1 | $6700 | $500 | $4000 | 2,200 |
| 2 | $10,000 | $2000 | $ 4000 | $4000 |
| 3 | $15,000 | $3000 | $ 3000 | $ 9000 |
As you keep earning more, you see that you can bifurcate a better amount towards your investment portfolio. This is how a simple goal-setting sheet can look like.
- Start with smaller savings
As you have already seen on the goal-setting sheet, you dispense all the expenses you have for the month provisioning your buffer for miscellaneous and sudden spurt of expenses too. Only then, do you arrive at how much money you can dispense for your investment portfolio.
Smaller or more affordable savings might look small for an individual month. But as this amount keeps growing over the years, the lump sum with interest compounding can be a great sum that can substantiate the long-term financial goals you have in mind.
- Assess your financial appetite vis-a-vis your portfolio size
You must assess your financial appetite vis-a-vis your portfolio size to look for investment products that fit your portfolio. Suppose in a month you can save $1000, then your yearly investment money adds to $12,000 a year.
Imagine, that would be $100,000 if you make a disciplined approach to save this amount every single year. Add to it the compounding interest that adds to his hefty sum.
Therefore, when you assess your financial appetite using simple math, you can determine the portfolio size of your investment basket.
- Appoint a financial advisor to help you choose investment products to help your portfolio grow
Between bonds, stocks, equities, exchange-traded funds, mutual funds, or structured products, it may be a little overwhelming for you as a newbie investor as to what profitable investment products to keep adding to your portfolio.
Appointing an investment advisor or financial advisor would be the right thing for you as an investor who has started your journey in investing afresh.
You can approach a wealth management firm to look for possible solutions that are customized in their approach to building a sustainable wealth basket for you that would thread its weaves for decades to come.
- Leveraging your assets or funds in a sustainable manner
You must sustainably leverage your assets or funds so that it gets a little more effective and organized when you may have to arrange for a loan or collateral at better interest rates.
Let us look at a simple illustration here:
You have a requirement for buying your dream car for US $10,000. Here, you are already maintaining a piggy bank or an emergency fund in lieu of the same. Let us assume you have saved up $5000 into your kitty savings or personal emergency fund, you can leverage this asset or use this money as collateral to secure loans at better rates of interest.
For a brand-new car loan, you may have to shell out $1000 each month in lieu of your EMI. Whereas, in this case, as you have already saved up $5000, you only need to take a loan amount for the remaining $5000 and your emis may just be half of what you may otherwise be paying on a brand-new loan.
Therefore, when you leverage your assets in an effective manner, half the battle is already won!
Suggested Reads : Discover Why Is Financial Planning Important For Everyone.
You must make an effort to rebalance your investment portfolio from time to time. This can be done by stashing out products that no longer provide a lucrative interest rate or a favorable rate of return for you as an investor.
On the other hand, you can re-introduce new sources of investment that provide you with better yields in terms of interest rates and returns on the investment amount. You may take the services of an investment or financial advisor to help you choose stocks or etfs from hundreds of them available in the market. You must also get your risk tolerance or liquidity ratios assessed before zeroing in on the right plan.
Therefore, you make sure you maintain an investment portfolio that provides you with an income security even during adverse market scenarios and eventually helps your wealth basket grow exponentially.
- Develop customized solutions for estate planning and retirement planning
Wealth generation is all about maintaining a sustainable form of living consistently. Therefore, you must not only look for investment avenues that help you gear up yourself towards your present style of living but you must also look for what you aim to do in the future.
In that parlance, you must look for customized solutions for retirement and estate planning.
You look for developing a corpus fund amount as you may not get many employment opportunities post crossing 60 years of age. Therefore, you must plan a substantial amount that can take care of your old age or retirement needs in a hassle-free manner.
Estate planning is also essential as you want to pass on your assets and wealth to your legal heirs in immediate succession in the event of your death. And, you do not want your assets lying around as you have spent years of hard work in building the wealth portfolio and you may as well want to pass on the wealth and assets to your family members who were otherwise dependent on you for their financial needs.
Therefore, looking out for customized solutions for retirement and estate planning is what you derive when you have a solid and robust wealth management system in place.
- Monitoring your spending habits precisely
There is a popular saying that goes like this:
‘The rich live life like that of the poor while the poor live life like that of the rich!’
This implies that rich people get richer as they plan to spend their financial resources wisely and effectively. The ultra-rich individuals may plan to spend a weekend getaway in their farmhouse over spending a hefty wallet on a vacation.
On the other hand, poor or middle-class individuals want to showcase their lifestyle amongst their office colleagues and peers. Hence, you may tend to go to clubs, discotheques, or dine at fancy restaurants even if you spend all that money out there and are left with nothing much to save out on.
This should not be the case. You must monitor your spending habits wisely so that you leave behind some amount of your dispensable money for the future.
Monitoring your spending habits therefore is a key aspect of planning out your wealth management in an effective and systematic way.
The Bottom Line
Wealth management practices must be done with a disciplined and systematic approach indeed. You must not deter or waver yourself from investing your funds into the corpus pooling funds or investment products.
Apparently, this may sound a little hard in the beginning. But when you eventually make saving a compulsory habit, you will be quite used to saving up funds in lieu of your investment portfolio.
As is said, habits die hard and therefore you must prefer a habit-forming pattern over saving money over spending it. This way, you pave yourself for a bright and prosperous future and also be able to embrace yourself from the calamities of life as such.
What are your thoughts on this? Do let us know in the comments!
Frequently Asked Questions or FAQs
Q1. How do you pick an investment portfolio on your own?
Answer: You can browse the stocks that are doing well in the stock market in 2022, 2023, and 2024. And, then you can choose between short term or medium-term investment plans by adding the stocks to your investment portfolio.
Q2. Can't I have enough funds parked in my savings account?
Answer: Well, to contemplate volatile inflationary consumer markets or to help you tide roller coaster scenarios you may contemplate in life, you may have to look for avenues of investment rather than parking your funds in your savings account alone.
You can also reinvest profits back into your investment portfolio instead of spending it for your personal use.
This way, you can mitigate loss making moves and share a great life ahead of you.
