The phrase “wealth planning” can be misleading: often, those entering the workforce think it’s something to contend with later, after wealth has been accumulated. Conversely, those eyeing retirement may think they’ve waited too long to make a solid plan for their financial goals. The truth is, wealth planning is the creation of a personal road map for financial goals now and in the future. The key to achieving the three stages of wealth planning—accumulation, preservation, and distribution—is to maintain an active role in monitoring and controlling the movement of money within your household throughout your lifetime.
Stage 1: Accumulating the Foundation
The first step of wealth planning revolves around accumulating wealth. As you enter the realm of earning adult income, it can be tempting to indulge in large expenses before marriage and mortgages. The accumulation stage presents a pivotal opportunity to lay the groundwork for a journey towards lasting financial well-being. With the advantage of time on your side, you can initiate a meeting with a financial advisor to strategically make smart money moves during the early years of your career. Making well-thought-out decisions early can pay off with significant long-term benefits. Many financial institutions – including State ECU – offer wealth planning services, where dedicated financial advisors can help you structure your investments to serve your lifestyle and goals. This is an optimal time to set your short-term (i.e., establishing a nest egg, paying off student debt) and long-term (second home, retirement at 55) goals. Without a clear understanding of your financial aspirations, you are more likely to find yourself navigating through a state of financial confusion or uncertainty.
Stage 2: Making Moves for Preservation
The best part about being responsible with your money in your youth is how it pays off in dividends later. Once you’ve established a secure foundation, it’s time to make sure your funds are diversified in a way that works for you and protects your resources when the market is volatile. At a fundamental level, it is crucial to avoid spending beyond your means and take advantage of compounding interest early on. Investment strategies vary widely, and in this stage of wealth planning it is still very helpful to continue utilizing the services of financial advisors and tax specialists to ensure you’re making the right moves. The objective during this time is to preserve and grow your money as you look toward the next stage of life and wealth planning: distribution.
Stage 3: Ready for Distribution
What has all this strategizing and saving been for? To ensure you can take care of yourself while you’re still here and of your loved ones when you’re gone. These days, retirement can often mean the escalation of activity instead of taking it down a notch. If you’ve done it right, you should have the time and the money to enjoy the fruits of your labor. You should feel prepared for future health or shifting living situations. You should also know where your money is going after you yourself are gone. The distribution of your wealth includes how you plan to live on your retirement, pay for your children’s education, make philanthropic contributions, and plan for the future security of your family.
When to Start
Regardless of where you stand in your financial journey, it is never too early or too late to talk with a financial advisor and begin planning for your envisioned future. Maintaining a handle on your finances sets a responsible example for your entire family and can have a major impact on generational wealth. Wealth planning can feel like a daunting task, especially in the face of mounting debt and escalating living expenses. Nevertheless, by acting now, you can regain command over your financial situation and prevent your finances from dictating your life.
