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Wealth Management: Guide to Adulting with Your Money

14 Jan 2022

Wealth Management: Guide to Adulting with Your Money | VI

People often have a misconception about wealth management and their money in general. They think you have to be a billionaire or something to have to "manage" your wealth, which is not true.

It also doesn't help that wealth management has always been marketed as a thing only for the affluent, especially by major financial institutions.

See also: 5 Money Management Tips You Should Remember

In reality, wealth is subjective. It comes from many sources. And basically, if you have any money to your name, even if you aren’t a millionaire, you still have to do some form of wealth management.

According to an article on Forbes, wealth management is the utilisation of processes, services, and products designed to grow, protect, utilise, and disseminate one’s wealth.

There are 3 levels of the spectrum of wealth: little wealth, moderate wealth, and great wealth.

While commercial finance emphasises greatly on wealth management for the "great wealth" level, we will be focusing more on the little wealth and moderate wealth side of things in this article.

Why is wealth management important?

"What is there to manage?" you ask. How complicated can it be with money? You earn and you spend, and repeat for life, end of story. Well... yes and no. Money is earned to be spent, but there are also precautions to be taken as well as plans to be made.

It’s just like skydiving. You can say "get on the plane and jump, that's it." But before that, you also need to be equipped with safety gear, a briefing of how it'll all go down, and what you should do in case something malfunctions.

Wealth Management | VI

So yes, we're generally just earning and spending money, but we also need to make sure we don't go broke, how we can have a cushion, and what to do if we lose the ability to earn.

Here are why wealth management is highly important for everyone.

1. It ensures a stable but enjoyable life

A lot of people are living an enjoyable life right now (a.k.a the YOLO life) but half of it is by no means stable. There are also people whose purse strings are so tight they barely experience any degree of enjoyment.

Good wealth management gives you a bird’s eye view of what you have, what you can afford, and how much is available for you to spend on great life experiences – basically to enjoy life but with peace of mind knowing you're not overspending. 

2. It ensures you're covered

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One of the elements of wealth management is protection, i.e., insurance.

Most people never thought bad things could happen until they do. And while bad things can happen at varying degrees, it is always best to prepare for the worst.

See also: Do you really need insurance in Singapore?

Having the necessary protection in place, such as personal accident, critical illness, or hospitalisation insurance not only cushions the financial blow in case bad things happen, but it also puts your mind at ease when going through your daily life, knowing you and your assets are covered in case of unfortunate incidents. 

3. It reduces dependency on your active income

Another major component of wealth management is investment, i.e., growing your wealth. We all hope to have the option of never having to work all our lives – ah, having that luxury of choosing whether you want to work or just kick back for the day.

By investing our money and growing it over the years to generate passive income, it will allow us to depend less on our active income, i.e., we don't have to work so hard for an income. Less work, more freedom – how lovely, isn’t it?

4. It helps you determine your life's trajectory

Imagine going to a new place without a map, direction, or guidance. You're just fumbling your way through, hoping you'll soon reach your destination. That's your life without wealth management.

Managing your wealth is like creating a map for yourself as you work your way towards retirement and your goals in general. It also gives you a clear direction of where you're at and how far along you are. The clearer the picture you have of your finances, the easier it is to achieve your goals. 

How to manage your wealth (if you aren’t rich)

1. Save

It goes without being said that before you grow and insure your assets, you first need to well... have assets. And you can't have assets if you don't save enough money to do so.

The first step to wealth management is to save and to have a saving plan in place. At what age do you intend to retire? How much you should save every month so you can have enough money by then? 

Don't forget to make sure that your goals are realistic and attainable too.

2. Budget

If you fail to plan, you plan to fail. This principle also applies to your money. If you don't allocate and plan where your money goes, it will be more difficult than it already is to accumulate your wealth.

There's no need to plan every dollar, of course. There should be a leeway especially for the money you've allocated for leisure.

See also: 6 Financial Tips for a Prosperous 2022

However, there should always be a clear allocated amount for each category: your savings, your financial commitments, your learning budget, your play budget, et cetera.

3. Insure

"It's better to have it and don't need it than need it and don't have it." This quote rings especially true for insurance policies. It is the one thing in the world that you can buy but can't touch, see, nor smell, and hope to never use.

With assets also come risks and they can come in many forms – the risk of losing your ability to work, risk of getting into accidents, and risk of being hospitalised and slapped with a crippling hospital bill. So, to your best financial ability, always protect, protect and protect.

4. Invest

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Unlike our parents' generation, "work hard and save" or "work as a government servant so you have an iron rice bowl" is not going to help much anymore in this day and age.

Due to Singapore's rapidly growing economy, inflation rates are also increasing quickly and salary/pensions are losing their abilities to catch up. Our only other option is to invest, so our money can grow even when we sleep, also known as passive income.

This can be achieved in many ways, be it through stocks, properties, bonds, and many more. The more important thing though is to first gain proper investment knowledge to minimise your risks and understand the product you want to invest like the back of your hand. 

Because of its absence in our education system, many are still lost and don't know really what to do when it comes to managing their wealth.

For people who are just joining the workforce and earning their first few years of income, it can feel like they're thrown into a land of the unknown called "adulting." Even some people, who already have a bit of money saved up over the years, are paying advisors thousands a year just to manage their money, just because they don't know how to.

See also: Free Financial Advice: Why Pay If You Can Get It Free?

Learn to manage your own wealth first, before hiring someone to do it for you, so no one can pull a wool over your eyes. Perhaps you'll even see that there's no need to get someone else to do it for you in the first place.

For more money management tips, head on to our free masterclass on creating passive income for families.

To learn more about wealth management, visit the Wealth Assembly website and watch keynote speakers discuss this topic.

DISCLAIMER

This article and its contents are provided for information purposes only and do not constitute a recommendation to purchase or sell securities of any of the companies or investments herein described. It is not intended to amount to financial advice on which you should rely.

No representations, warranties, or guarantees, whether expressed or implied, made to the contents in the article is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

We, 8VI Global Pte Ltd, disclaim any responsibility for any liability, loss, or risk or otherwise, which is incurred as a consequence, directly or indirectly, from the use and application of any of the contents of the article.