Five strategies on how to manage your money from our wealth advisors who advise high-net-worth families.
How do investors and rich families handle their finances? And can you design your financial strategy using the tactics they employ? The reality is that many of the advice and techniques used by affluent families to manage their wealth will help you, regardless of your net worth—whether it is $1,000 or $10 million. A few basic money management ideas will also always be beneficial.
Even though every scenario is unique, a sound financial plan will begin with the responses to these basic questions: What priorities and ambitions do you have? What uncertainties do you have? When do you plan to accomplish your objectives?
1. Develop a good plan.
It may seem apparent, but effective financial planning begins with a strategy. Better planning leads to better results. Making a plan might help you clarify your priorities. It will also provide you with a structure to follow while you work toward your goals.
“Everyone can benefit from developing a plan to help them achieve their goals, whether it’s a holistic wealth strategy or a simple spending budget,” Pierce states. “Be sure to track your progress and stay true to your goals. Modify your plan as needed, but not too often, because you don’t want to react to short-term events.
Start by deciding what your short-term and long-term goals are. You may want to buy a new television, which is a short-term goal, or you may want to save for a down payment on a house, which is a long-term goal. Then create a budget that will help you achieve those goals.
2. Use time to your advantage
Plans are most successful when they are built in advance of a goal. The more time you have, the greater the chances of success. On the other hand, the closer you are to an event or goal, the fewer options you have. This is particularly true when it comes to retirement planning and investing.
“Time is your best friend until it isn’t,” Pierce says. “So take advantage of it while you can. The longer you can contribute to a tax-advantaged retirement account like a 401(k) or IRA and don’t withdraw the funds, the more benefits you’ll receive from compound growth over time.”
A longer target time frame allows investors to be more active when it comes to retirement investing. This implies that equities and other assets with larger potential returns will receive a larger allocation of funds. More information about dates and diversity is provided in this article.
3. Don’t get carried away by your emotions
Emotions should never drive financial decisions, but this happens all too often. Emotional reactions often result in impulsive decisions that can quickly reduce the effectiveness of a well-constructed financial plan.
“When a plan is designed properly, it serves as a reminder not to act impulsively because the plan was built to withstand these specific types of situations,” Pierce says.
Therefore, the secret is to create a plan with logic, thoroughness, and a good understanding of the unfavorable events that could derail it. Anticipate and get ready for those challenges, like a stock market meltdown or recession, by designing your plan so that these things won’t stop you from reaching your objectives.
Your comfort level with risk should be one of the factors you take into account. As everyone knows, taking a risk can pay off, but there is always a chance that it will backfire. It makes no sense to take on more risk than you can bear. Rich investors are well aware of the level of risk they can tolerate.
4. Communicate effectively.
A crucial component of financial planning is communication. Whenever the plan calls for the future distribution of assets to other parties, including your kids, it is best to clearly outline your goals upfront.
Speaking up is another helpful tool for maintaining your ground. For instance, you can speak with a financial advisor for guidance, structure, and discipline if you need help staying on track with your objectives. Informally, having a spouse’s or friend’s support can often be beneficial.
Consider going to a Regions Bank branch and having a conversation with a bank representative to receive assistance getting started on your financial plan. For you, they can draft a unique Greenprint Financial Plan.
5. Utilize These Four Estate Planning Principles
Contrary to popular belief, not everyone needs an estate plan. Estate plans specify what will happen to your money and belongings after your death. They consist of your will as well as additional papers and instructions.
“You don’t need an excessive amount of money for estate planning for it to have value,” Pierce says. “If you have a spouse and/or children, you will benefit from having key documents in order, including a will, a financial power of attorney, and a health care power of attorney.”
Here’s where being proactive and effectively explaining your plans may help:
Blair had a business partner who was prepared to retire. “The couple wanted to sell their business to one of their four children,” he said. “They posed crucial queries, such as: Does every youngster possess the necessary passion? Do they find the business enjoyable? Are they prepared to put in the necessary effort to achieve our level of success?”
All but one of the kids are eliminated during that process, leading to an obvious conclusion.
