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:
- wealth accumulation
- wealth protection
- wealth distribution
- wealth transfer
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.