Planning, protecting and growing your wealth in uncertain times

Wealth management is the process of managing one’s financial assets and liabilities, with the aim of achieving one’s financial goals and enhancing one’s quality of life. It involves various aspects such as budgeting, saving, investing, tax planning, insurance, retirement planning, estate planning, and philanthropy. Wealth management is not only for the rich and famous, but also for the common man who wants to secure his or her future and make the most of his or her hard-earned money.

However, wealth management is not an easy task, especially in uncertain times like the present. The world is facing unprecedented challenges such as geopolitical tensions, social unrest, cyberattacks, and market volatility. These factors can have a significant impact on one’s income, expenses, assets, liabilities, risks, and opportunities. Therefore, it is essential for individuals to plan, protect, and grow his or her wealth in a smart and prudent manner, by following some simple yet effective steps.

Plan your wealth

The first step in wealth management is to plan your wealth, which means to define your financial goals, assess your current financial situation, and create a realistic and flexible budget. Some of the questions you should ask yourself are:

What are your short-term and long-term financial goals? 

What are your sources of income and what are your fixed and variable expenses?

What are your assets and liabilities? What is your net worth and cash flow?

How much risk can you tolerate and what is your investment horizon? 

How much tax do you pay and how can you optimise it? 

What are your insurance needs and coverage?

What are your retirement goals and strategies? 

By answering these questions, you can have a clear picture of your financial health and identify your strengths, weaknesses, opportunities, and threats. You can also set SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals and track your progress and performance. You can use various tools and resources, such as online calculators, apps, websites, books, podcasts, blogs, etc., to help you plan your wealth.

Protect your wealth

The second step in wealth management is to protect your wealth, which means to safeguard your income, expenses, assets, and liabilities from potential risks and losses. Some of the ways you can protect your wealth are:

Build an emergency fund: An emergency fund is a cash reserve that can cover your essential living expenses for at least three to six months, in case of an unexpected event, such as job loss, medical emergency, natural disaster, etc. 

Diversify your portfolio: Diversification is the practice of spreading your investments across different asset classes. 

Hedge your risks: Hedging is the practice of using financial instruments to offset or reduce the potential losses from an adverse movement in the price of an underlying asset or liability. 

Insure yourself and your family: Insurance is the practice of transferring the risk of a loss from yourself to a third party  in exchange for a premium.  

Grow your wealth

The third step in wealth management is to grow your wealth, which means to increase your income, expenses, assets, and liabilities, in a sustainable and profitable manner. Some of the ways you can grow your wealth are:

Increase your income: Increasing your income is the most obvious and effective way to grow your wealth, as it can boost your savings, investments, net worth, and cash flow. 

Optimise your expenses: Optimising your expenses is another important and efficient way to grow your wealth, as it can reduce your wastage, debt, tax, and risk. 

Invest your money: Investing your money is the most powerful and rewarding way to grow your wealth, as it can compound your returns, and help you achieve your financial goals faster. 

Wealth management is a vital and valuable skill that can help a layman to plan, protect, and grow his or her wealth in uncertain times.

(The writer is Founder, Managing Director and Chief Financial Planner at Dilzer Consultants Pvt Ltd)