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Financial Matters

Financial Well-Being and Wealth Management

by Barry Cohen on 07/26/16


My aim as a financial advisor is to help my clients achieve and maintain an essential element of  happiness - financial well-being.  As such, I thought it appropriate to launch this blog by briefly describing what I mean by "financial well-being" and its connection to wealth management.

Financial well-being is the state of feeling in control, comfortable, and secure about your current, and prospective financial situation.  Specifically, it is having: 1) sufficient financial resources to support your desired lifestyle; 2) adequate safeguards to protect those resources; and 3) a cogent plan to guide you in accumulating additional resources to fund your financial goals.

It may be helpful to think of your financial resources as constituting your "wealth".  And, like your health, your wealth needs to be properly managed to ensure it remains sound and effectively working towards achieving your financial goals.

There are basically four dimensions to wealth management:

  1. wealth accumulation
  2. wealth protection
  3. wealth distribution
  4. wealth transfer
Wealth accumulation is systematically adding financial resources to help fund your financial goals.  Wealth protection is having appropriate safeguards in place to protect against risks that could adversely impact your financial resources.  Wealth distribution refers to how you spend your resources during your lifetime, including the payment of taxes.  Lastly, Wealth transfer concerns lifetime gifting, and leaving a financial legacy.

These dimensions of wealth management tend to be interdependent, i.e., an action in one dimension can impact the others.  For example, the payment of taxes (wealth distribution) reduces resources available for investing (wealth accumulation); purchasing insurance (wealth protection) requires the payment of premiums (wealth distribution).

This interdependence between all four dimensions can make the task of managing your wealth tricky. It is important that financial decisions be carefully considered and analyzed in the context of your total wealth and not viewed in isolation.

A comprehensive financial plan, which will be discussed in-depth in a subsequent blog, takes a holistic view towards wealth management and can be extremely helpful in providing the necessary guidance to achieve your financial goals, and in attaining financial well-being. While financial well-being alone is not likely to bring you true happiness,  it nevertheless is essential to the mix.






PLEASE NOTE:

The views, thoughts, and opinions expressed here are those of Barry Cohen and should not be construed as financial advice. Each individual's financial situation, goals, and concerns are unique. Readers are encouraged to seek out a qualified financial advisor should they desire assistance in managing their own financial affairs.

Financial Matters", will touch on topics within each of the dimensions of wealth management and their connection to achieving financial well-being. If you have ideas for certain topics that you would like discussed, please email me at bcohen@bcwealthadvice.com.