Sunday, 5 November 2017

3 Steps to Start Wealth Management

A financial month of a working adult would typically look something like this:
  • receive salary in bank account
  • go around daily necessary expenses eg. food, transport, loan payments
  • have discretionary spending eg movies, shopping, travelling etc. 
  • keep the remaining amount in a bank saving/deposits product
  • wait for next salary
While such approach is a logical one and easiest to embark on, it is not ideal for someone striving towards a secure financial future and comfortable retirement. One needs to take a holistic look at his entire wealth plan and start taking suitable actions.

It is essentially allocating our money to specific wealth management goals, maximising their usage over our working life. 

Here, I offer 3 sequential steps to start managing one's finances better.

Manage Personal Cash Flow
We should all have separate bank accounts for daily expenditure, savings, and investments. Set up automatic funds transfer from the salary-receiving account into savings and investment buckets right after one's pay day. Don't leave it till the middle of the month. Chances are we would compromise on the savings or investment amount given our propensity to spend. 

As I always say, people hate money. Somehow when we see numbers in our bank account, we must quickly get rid of them by exchanging them with things or services. 

However, we can respond to such an innate hatred of money better - by getting them out of sight via transfer to different account and leaving a just-enough-balance for necessary spending and some entertainment in the main account. With our funds in their rightful compartments - for savings and investment, they can be put to good use when time calls for it. 

Get Essential Insurance Coverage
Insurance transfer, or reduce partially, the impact of risks arising from life's catastrophic event. It is done by entering into contracts with insurance companies to grant an agreed amount upon certain unfortunate events taking place. 

This is critical due to the deadly effects of life catastrophic events such as passing on, critically ill or total disability: 
  • potential to deplete one's accumulated assets to deal with the aftermath, and rendering his future earnings capacity zero
  • jeopardising family members' and dependents' livelihood through loss of income and a sudden need to take over debt payment
Insurance should gear towards restoring one's life back to the state before the strike of unfortunate events, as much as possible. Life insurance ensures your dependents have money to fall back on; hospitalisation plan pay for expensive medical and treatment costs, disability insurance payout replaces your last drawn salary. 

With proper insurance in place, the downside risks of life major mishaps are significantly reduced and our base assets protected. We can start investing for wealth growth. 

Invest for Higher Returns
There are many investment products in the market such as shares, exchange traded fund, unit trusts etc., with one common goal - to earn returns.

While each product offer the potential of returns, they always come with differing level of risk of losing money. This is because investment attempts to give you back a larger sum in future even when future is never certain. Herein lies the most fundamental concept of investment risk. And the higher the potential returns, the higher the possibility of losing money (risk).

Another factor to consider is the costs of investment, which is also inversely correlated with returns. Do our investment products have too high a cost that it affects the returns? Could we put in some efforts to learn the ropes of investing, and turn to other less costly instruments?

One should try to have a good mixture of investment products, considering the returns, risks and costs. Start taking a personal financial review to uncover what products are suitable for you, taking into account your risks tolerance and other factors such as age and time horizon. 

While we work hard for a better future, we should also be smart about managing our wealth. Its our hard-earned money, and no one else care about it as much as we do.

There will be time when human beings stop earning, but money can work every single seconds with no down time. Hence, not letting our funds earn a reasonable returns would be a huge disservice and we should start taking actions today.  

*Feel free to contact me at, or fill in the contact form at top right, if you like to start a proper personal wealth plan today. 

1 comment:

  1. Very popular Wealth management Coursesacross both students and finance courses online are available at Flip. Check our website now


Recent Financial Statement Analysis Workshop

More investors are getting interested in using Fundamental Analysis to short list strong company stocks to invest in, especially in a lacklu...