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Using Strategy and Process for the Use of Your Money

By Evelyn Jacks

An interesting way to think about investing on an after-tax basis is to bring a strategy and process to the use of your money. Think of your money as a business, especially if your investable assets are in the high net worth range (over half a million dollars.

What is your vision for your capital? How would you like it to grow? How will you measure results over the longer term? This questions can help you develop a thinking process around the results you want. Following are some additional thoughts on developing a strategy and process for your investment activities.

Strategy. As people age, the amount of money required to fund needs and wants generally grows-to a point. In the early years, the emphasis is on basic survival; later on consumer wants; still later on self-actualization-that enviable stage when the client's resources allows for the caring of others. At the end of life, health vulnerability can come into play-for yourself or your loved ones.

And so the purpose or use of your money, changes with different lifecycles. Readiness is key when it comes to those uses, which we at The Knowledge Bureau have broken down into four stages:

  1. Non-Discretionary Spending
    . The funding of basic needs--food, clothing, shelter
  2. Discretionary Spending and Saving
    . The satisfaction of consumer wants; and savings for emergencies
  3. Creation of Capital
    . The use of money as a building tool: to earn income and create wealth
  4. Management of Sustainable Wealth
    . The preservation of sustainable wealth from one lifecycle to the next

What stage are you in today? How is this influencing your investing and spending activities? What should you do be doing differently to prepare for Stage 4?

Process. Three key financial documents are required to plan and measure your wealth management progress over time:
  • The personal net worth statement, which is a snapshot of acquired wealth
  • The tax return, which defines disposable income
  • The financial plan, which enables future decision-making on an ongoing basis

Creation and management of these documents around your financial targets is really helpful, especially if you want to make joint financial decisions over time, with your family members and your professional advisors.

Behavioral Skills. In order to make wise choices about the use of their money over time, investors must use best practices to manage income and capital. Those best practices can be taught at school, in the family, or in the financial services. They can therefore be available to you at different access points throughout life.

However, the reality is that financial behavior by users of financial services includes the ability to assess, evaluate and employ financial services with purpose over a lifetime. In the end, what is needed is a strong focus on the stewardship of sustainable wealth according to your own plan for your family.


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