WEALTH CREATION is more than just investing. It is the strategic targeting of investment products to achieve specific goals in your life. Wealth creation takes a look at your life, your objectives and your investing horizon in order to be effective.
There is no easy way to wealth. It begins with setting your goals. Many people speak of buying a house in five years or saving for their child's university education. Part of achieving these goals is having an idea of what the costs are now, and how much costs are expected to rise so that you can be prepared.
SMART INVESTING
Nonetheless, all your financial goals are achievable, but in looking at your goals, it helps to be smart. Your financial objectives must be specific, measurable, achievable, realistic and take into consideration your timeline. Owning a $25 million home may be achievable for all investors, but not everybody is able to own this $25 million home by next week. Be realistic as to what you are working for. Set goals with appropriate timelines; otherwise you will be faced with frustration.
The key is to start now. An objective such as retirement planning is an important goal that is always easier to achieve sooner rather than later. A 20 year old saving just US$1,000 in an investment account that pays 10 per cent yearly after taxes can have over US$100,000 by the age of 65. Now, don't we all wish we could turn back the clock?
YOUR DREAMS
How quickly you want to reach your dreams is a very important component on the road to wealth. In the simple example above, there was a 40-year horizon to take US$1,000 to US$100,000. Wealth creation takes into account the exact amount of time you do have to invest and appropriates the investments accordingly.
Next, consider how much money you wish to dedicate each month to reaching your dreams. This is done by first identifying the amount of income from all sources and the expenses you are obligated to service. As we have discussed in previous wealth creator articles, a budget is the key to tracking your monthly income and spending so that you will see your cash flow on paper. One also has to take into consideration the current assets owned and the liabilities owed. From there, the level of disposable income can be determined and directed towards investing for your goal.
What we have discussed above will become your written financial plan your realistic goals and the time you want to achieve them and the money available to fund your dreams. Without a plan, wealth creation will be unnecessarily difficult.
ALONE OR WITH A PARTNER?
And this is where you ask yourself how much time and energy you can devote to finding the right mix of investments to create wealth.
Wealth creation through investing demands an understanding of the various financial markets and the opportunities they present. One must have a comfort level with the stock, bond and money markets, both locally and overseas. Some people may have the time and the interest to dissect the markets and search for ways to create wealth.
For those who cannot devote the hours each day to study the market, it is best to work with
a financial partner, or wealth manager.
Wealth managers are trained financial experts who spend their working days analysing the markets on behalf of their clients.
A wealth manager's job is to work with their clients to create wealth. It takes time to develop an understanding of each individual investor and what they want from their investments.
Net week we will continue to explore wealth creation and things to consider when choosing your investments.
We welcome your comments and feedback at info@ncbcapitalmarkets.com or 1-888-4WEALTH.
