Wealth management is one of the prime concerns of everyone. And if you want to ace wealth management, you need to understand the value of the 5 elements of perfect wealth management.
It’s not the amount of money you’re earning that makes you rich, but the amount of money you can save for its further growth makes you rich. E.g. you’ve $10,000 income from your job, and if you can save not a single penny from it, you won’t achieve financial independence this way but if you can save $2000 and further invest it, your chances of financial freedom increase.
Earnings are different from income. Income is the earnings from your job, while the dividend obtained from any mutual fund, or rent from real estate investments can be considered as passive earnings. So, earnings are combination of income from your job, the income that you obtain from investments e.g. real estate, stocks, business etc. is passive earnings, there are also royalty earnings, and the newest kind of earnings is LIABILITY EARNINGS, this earning can be obtained from liabilities! You just need some innovation and sources to earn from liabilities!
So the first step for financial freedom is to note down every source of earning that you’ve, how much you are getting from it and what’s the duration of this kind of earning. E.g. royalty earnings are for lifetime, job earnings are for a limited period, passive earnings keep coming until you sell the investment, so note down everything to get ready for the next element.
Budgeting is the most important aspect of wealth management. It helps you in balancing the earnings and expenses. The main element of financial freedom: investments. If you can balance expenses and earnings, and save enough to invest, the worth of budgeting goes quadrupled, because the main motive behind budgeting is to reduce the irrelevant expenses and invest the savings. Remember: expenses are basically of three types 1) Basic 2) Desirable 3) Luxuries.
The goal is to reduce or postpone the desirable and luxuries expenses, since basic expenses can’t be ignored. Save this money and start investing! When you’ll get some passive earnings, you can increase your desirable and luxuries expenses.
Prioritize your expenses, pay off the priority debt first, and gradually reduce the debt. These are some of the ways to effective budgeting.
The best friend to your financial freedom. Investing opens the doors to financial freedom. You just need to be more aware about the investments that can give you more returns.
Start with basic investments: Gold and silver. These can be considered as the best investment options with low risks and no overhead costs. The next category of investments have increased risk, e.g. stocks, options, mutual funds, ETFs etc. But unlike gold and silver, their risk is highly volatile and returns are never assured, so I suggest learning more about wealth quotient before proceeding with investment.
The third and one of the famous investments for exceptional high returns and low risk is the Real estate. Benefit? Leverage and consistent earnings. You can buy a house of 100,000 only by paying around 10,000-15,000 and this is the biggest advantage of real estate. Your earnings start with the first rent check, and real estate maintenance costs aren’t much as compared to the returns it gives. Try to invest in real estate if you want to accelerate towards financial independence.
The next category is business, where risks reach to a new level, but the returns are infinite if successful, if you know about “The L.Q. star” the business leadership and management becomes easier for you.
So start your car and begin your journey to financial freedom by investments.
You’ve made your investments and reaping the returns, but every investment comes with risks, and you too can reduce the risk through protection.
E.g. if you’ve invested in real estate, protect the property from damages caused by calamities, or any damage by your renters. This helps you maintain the value of the property. Hire a good property management company, it’ll help you find new renters, take rents regularly from them, and keep you and your renters happy. Have your renters insured with renters insurance, so that in event of damage to anyone in your property, insurance will take care of the renter’s expenses. In this way, you can reduce the risk in the real estate.
Protection plays a vital role in business, where large financials and products are involved. Many people have suffered from losses due to unpatented products, and this ignorance of protection leads to big losses. Protect your company by choosing the right corporate entity. In this way protection can prove to be a life saver in bad times. So never forget to protect your wealth.
Last but not the least, the element of utter importance in everybody’s life; expense. At this point, you’ve budgeted, saved and invested and reaping the earnings. But now it’s time to use the earnings. Most people spend almost 100% of the profit from investments, but this never leads to the road to financial independence, instead divide the profit in some sections,
E.g. 50% of the profit could be invested back to reap more profits, you can vary the percentage according to your needs. 30% to the desirable or luxury expenses and 20% to philanthropy. Expenses are endless, but you’ve to make the right mix in order to live a luxurious life along the financial independence. So take care of your expenses, and never forget to giveaway some money. Because giving away always creates a sense of satisfaction of helping others.
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