Financial planning and wealth management are essential aspects of any individual or family’s financial health.
Many people use the term “wealth management” to refer to various services that involve managing assets, such as investments, tax planning, estate planning, risk management, and more.
On the other hand, “financial planning” refers to creating a plan that includes setting goals, developing strategies, and deciding how assets should be managed.
Unfortunately, financial planning and wealth management processes seem complex and overwhelming. However, it doesn’t have to be if you know the basics and what steps you need to take to create a solid plan for your future.
Financial planning glossary: The ABCs
A is for Assets
An asset is anything that has value or can generate income for you.
There are two types of assets. Physical assets can include property or stocks, while intangible assets can include intellectual property or skill sets. Knowing what you own is necessary to understand your finances better so you can utilize them effectively to achieve your financial goals.
For long-term financial success, it’s vital to diversify your investment portfolio.
For many investors, that involves owning a combination of stocks, bonds, and real estate to help secure a strong financial foundation. Assets from these three can provide an opportunity for steady returns and greater protection against market uncertainty.
In addition, understanding how each of these assets can benefit your financial plan is key to effective planning. Diversifying your investments can create quality growth opportunities and minimize the overall risk of loss when markets become unpredictable or volatile.
Diversifying one’s asset portfolio with stocks, bonds, and real estate can provide a comprehensive approach to achieving financial stability over time.
B is for Budgeting
Next, developing a budget is crucial to managing one’s finances to avoid overspending or needing credit cards or loans to cover monthly expenses.
A budget should include all your monthly income sources, expenses (fixed and variable), and money allocated toward monthly savings. When developing your budget, make sure that it includes discretionary spending on items such as entertainment or travel so that you don’t feel like all your money goes into necessities only.
In addition, budgeting with your true purpose for money in mind is a great way to ensure that the money you’re spending reflects your values and what you care about most.
Having a budget will teach you about the various aspects of your finances and how much money you allocate for different areas of your life. Knowing what you value most is critical to help you make sound financial decisions and to prioritize your spending.
Budgeting can give you important insight into where your money goes and allow you to align your core values and your spending.
A budget should not be restrictive. Instead, it should be empowering and aid your journey toward long-term financial success.
C is for Consulting a Fee-Based Wealth Manager
Lastly, consulting a fee-based wealth management professional can be critical to your financial success.
A fee-based wealth manager charges their clients directly for financial planning services—this helps to eliminate biased advice by reducing potential conflicts of interest. By working with a fee-based wealth manager, you gain access to an experienced professional who understands your unique situation and offers advice in your best interest at all times.
Typically, fee-based wealth managers charge for their services in one of three ways:
- Assets under management (AUM) fees: AUM fees are a billing method based on the amount of invested assets you have with your wealth manager. Average fees are just over 1% of total invested assets, though they can range by the advisor and service level. In addition, many AUM advisors have an investment minimum to consider.
- Flat fee based on complexity: Flat fees based on complexity involves a detailed look at the complexity of your financial situation and a flat price to offer financial planning. These fees can be charged monthly or annually.
- Hourly rate: Lastly, some fee-based wealth managers offer their services at an hourly rate, typically ranging from $150 to $400 per hour. This can be a great option for smaller projects or one-time services.
Ultimately, while there are different ways to engage with a fee-based fiduciary advisor, the result is the same—you receive fair and unbiased advice in your best interest.
Conclusion: You can experience financial success by following the ABCs of financial planning and wealth management
In the end, remember:
- Assets, including physical assets like property or stocks and intangible assets like intellectual property or skill sets, have value and can generate income.
- Budgeting is developing a plan that includes all monthly income sources, expenses (fixed and variable), and money allocated toward monthly savings.
- Consulting a fee-based wealth manager ensures impartial advice from someone who understands your situation best.
By following these financial glossary terms, you can put yourself on the path toward achieving financial security now and in the future. Whether you require help with budgeting, investments, or tax planning, consulting a qualified professional, such as a fee-only wealth management advisor, is always recommended when making important financial decisions.
Tencap Wealth Coaching is here to help
If you’re interested in working with a fee-based wealth manager to ensure your financial success, then Tencap Wealth Coaching is here to help.
At Tencap Wealth Coaching, we’re focused on helping you achieve your financial goals and more through academically sound financial planning. From investment planning to retirement planning and strategic tax planning, we can manage the complexities of your money and allow you to relax and enjoy life. Get to know Tencap Wealth Coaching or schedule an introductory meeting below.
Greg Black, CFP®, ChFC®
Greg is a fiduciary who assists you in every area of your financial life, including: tax strategy, investments, estate planning, cash flow optimization, and insurance protection. Each category is interconnected and crucial to ensure you don't unknowingly or excessively forfeit money to financial institutions or the government.