Golden Rules of Wealth Management (2024)

Who doesn’t want to be rich? Just dreaming or aspiring isn’t enough. It would be best if you acted towards it. With a goal in mind and discipline to achieve it, you can be rich. However, this is not something you can achieve overnight. Wealth Management is a long term process. With the right information and plan, one can easily achieve their financial goals. Irrespective what your goals are, you need to ensure you are following these rules of wealth management.

1. Know your real worth

Always know your real worth. It is the first step for financial planning. Knowing your net worth will help you know your assets and liabilities. Moreover, this will be an eye-opener for you if you are in debt. Reviewing your net worth will help you understand where exactly you stand. It’ll guide you through your financial decision making and wealth management.

2. Spend Less and Save More

It might sound boring. Almost everyfinancial advisor would say this. However, it is the key to your financial success. Though it is boring, only by spending less and saving will help you through your wealth management process. To create wealth, you need to have surplus funds to invest. Simply exhausting your income and not saving is not going to make you rich. It doesn’t mean that you have to live a life without any pleasure. You need to know how to balance. To start, keep track of your spending and have a strict budget and stick to it. It is the best way to keep your expenditure in check.

3. Be safe, Be insured

You can never be certain of life’s plans for you. Though everyone wants to earn money, you should make sure the family will be secure with that wealth. Always get yourself and your family insured. Wealth Management is important but doesn’t mean you mix your insurance and investment. First, make sure your family has proper coverage and will take care of them in case of emergencies. Also, for your investments, talk to afinancial advisorwho will help you out with the right plans. Always remember, do not mix your investments with insurance. Also, do not take insurance plans to save tax; this is what will help your family in emergencies, therefore choose wisely.

Explore our article on Difference Between RSU and ESOP

4. Know the product before investing

There are a plethora of financial products. Knowing about all is difficult, but at least know about the products where you are investing. Never gamble with your hard-earned money on products that are complex to understand. Afinancial advisorcan help with designing a proper wealth management plan for you. Investing requires understating of your risk profile, financial position, and goals duration. Therefore, upon evaluating all these factors, a financial advisor would suggest the best product for you.

5. Don’t put all your eggs in one basket

Oh Yes! Another important rule to keep in mind while investing. Might be old, but will never lose its relevance.Diversificationis as important as investing. No diversification is as bad as not investing. It helps in minimizing risk and eliminates the dependency on one source of income and helps in generating returns through other channels. Diversification also helps in preserving capital. It’s imperative to have a diversified investment portfolio as dependence on just one or two investments will have a high impact your saving in a market crash.

6. Have Patience

No one can become a millionaire overnight. It takes time and requires hard work. It needs commitment and patience. Similarly, wealth management is also a long process that requires patience. Investments are subject to risk. It’s important to stay calm during market fluctuations. Your investments require some time to mature and settle. Therefore, do not take decisions based on short term movements of the market. Volatility is an integral part of any investment, and all you need to do is tackle with patience. Talk to an advisor when you are worried about the market movements or falling returns to get the best advice.

7. Review your investments periodically

Patience is good, but it will not help you earn returns unless you monitor your investments regularly. Periodicreview will help you re-balance your portfolio to stay aligned with your changing goals and needs. It will also help in identifying underperforming assets and getting rid of them. Investments from underperforming funds need to be reallocated to better funds to help you achieve your goal. Therefore, set a time, quarterly, half-yearly, or yearly and make sure you are reviewing your investments.

8. Plan your Taxes

Wealth management isn’t just about investing. It would be best if you had a strategy for your taxes as well. Educate yourself of the available deductions that help you reduce your taxes. Make sure you are making the best of all the claims. Taxes are going to be there all your life. Plan for them well in advance. Do not end up making hasty investment decisions in the last minute.

9. Plan for Retirement

All your investments will come to your rescue during retirement. The more you save today, the more relaxed life you can have during your retirement. Therefore, one can reap wealth management benefits during retirement. Make sure you have aretirement fundthat will help you lead a comfortable life during your retirement days.

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• What is Free Cash Flow?

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