If you are looking to grow your wealth, you may have heard of an active wealth plan.
An active wealth plan targets five different areas:
- Spending
- Investing
- Protecting Wealth
- Managing taxes
- Borrowing
Through an active wealth plan, you can increase your wealth through disciplined strategies in each of these areas.
Having a strong financial life takes time and practice. An active wealth plan is one way you can grow your wealth and increase your financial well-being.
The five components of an active wealth plan
Building an active wealth plan comes down to five components that need to be monitored throughout your life.
Borrowing
The practice of borrowing money can be difficult and is often viewed with a negative connotation. Debt can certainly be a burden if mismanaged, but for many people, borrowing money is a necessary part of life.
Creating an active wealth plan around borrowing means that you are setting certain strategies on how you will borrow money. When the market is right, borrowing money can help you increase your wealth in the long run.
For example, if you are buying a condo, you may be tempted to sell your investments to pay for it.
However, if housing prices are low, you may be better off borrowing money and keeping your investments where they are.
You can make the most of your loan payments and continue to gain wealth through your investments.
Spending
Spending money responsibly is an essential skill to have if you wish to gain wealth. Through an active wealth plan, you will chart out how you spend your money, and when.
Some of the most common tactics in this area include budgeting and tracking where your money goes.
Some people view saving everything as the fastest way to gain wealth, but this is not true. Spending wisely, including on investments such as education and real estate, can result in long-term gains.
Investing
Careful investments are key to growing wealth. Someone with an active wealth plan will know when to invest, and in what sectors.
As a general rule, it is best to invest when the market is low. Potential investors should also seek to invest in things that pay dividends, or have a reliable stock performance.
Investing may seem like a tricky field to break into, but it does not have to be. Beyond the stock market, some common areas for investment include:
- Property, such as real estate or land.
- Higher education or ongoing training.
- Business ventures.
As with any area of finance, someone creating an active wealth plan will need to research potential investments before spending money.
Protecting wealth
As you begin to accrue wealth, a strong active wealth plan will make provisions for how to keep your money secure. Many choose to keep their wealth safe by having investments in many areas to avoid loss or relying on expert financial planners to help them protect their money.
Managing taxes
Taxes are inevitable, but certain things like charitable contributions and small donations to Goodwill can give you a tax break.
The intricacies of taxes can be overwhelming, and if you are new to active wealth planning, it is worth your time to consult an experienced tax accountant.
Just remember that being tax savvy still means sticking to requirements and paying where you need to.
How to create an active wealth plan
The benefits of an active wealth plan are undeniable, and it is natural that you would want to get started. However, keeping the five areas in mind, you should employ the following strategies to create a plan that is reliable and reasonable to implement.
Do your research
A wealth plan should not be haphazard, and you should be prepared to invest some time and energy in creating the best strategies for managing your wealth.
If you are new to money management, learn how the market works and how you can get started on investing.
Although the internet is a priceless tool, you may find it helpful to take a certification course or attend a class that will walk you through the basics of personal finance.
When investing, be sure to do research on different sectors and the things you are choosing to spend money on. Look for the fine print, and be aware of how certain stocks perform over time.
Talk to experts
In all areas of an active wealth plan, there are trained experts who know how to navigate the complex landscape of wealth management.
Some of the following professionals may be helpful to consult as you form your active wealth plan:
- Financial planners
- Accountants
- Investors
- Current business owners
You may have to pay a fee for certain services, but this can often pay off in the long run.
Know your finances
As you get started with your active wealth plan, it is essential to know where you stand financially.
No matter where your current wealth stands, it is possible to grow it as long as you are honest with yourself and create a strong plan.
Take stock of the following:
- All accounts, including savings and checking
- Investments you may already have
- Cash
- Debts
There is no shame in starting small. Everyone has to start somewhere, and it is important to know your current finances.
Make a budget and set goals
You should have a budget in mind for how much you reasonably can spend. Budget your day-to-day spending, including factors such as housing , living expenses, and debt payments.
Additionally, create a long-term budget that sketches out how much you can spend in a year on investments or other large expenditures.
As you create a budget, this is also a good time to set goals. Look at where you are now, and how much you have to spend.
Ask yourself where you would like to be in a month, a year, or five years. Goals are essential to keep you on track.
Sometimes it can be helpful to think about goals in tangible terms. Maybe you want to own a house within five years or dedicate a certain amount toward retirement.
Whatever your aspirations are, having them on the horizon will make it much easier to create your plan and stick to it.
Follow your plan and adjust as necessary
It is essential to follow it your active wealth plan. Set small goals and continue to check in with the experts who may be helping you.
Stick to your budget and keep an eye on upcoming costs throughout the entire year so you are always prepared.
If your plan is unattainable, you should consider altering it. As your wealth grows, you can expand your plan to account for your new assets. Your active wealth plan is not static.
Conclusion
The world of finances is filled with uncertainty and small details, but an active wealth plan can help you grow your wealth in confidence.
Now that you are aware of the five major facets of a healthy financial life, you will soon create a plan that benefits you greatly.
Image by Ewen Le Rallic-Maho