Which Wealth Management Issues Come First?

17 September 2021
 Categories: , Blog


Wealth management is a process. For those starting out, they may naturally wonder which parts of the process should come first. Fortunately, a wealth management services firm will typically tell its clients to start by focusing on these three issues.

Generating Income

It takes money to make money, especially if you want to see your money produce compound returns. Foremost, you want to either have a job or an income stream that can reliably satisfy your everyday needs, cover your debts, and leave enough behind to meaningfully invest.

One of the big goals of wealth management is to find reasonable ways to turn your financial surplus into a source of compounding wealth. This is effectively money that makes more money. Even someone who already has a well-paying job, such as being a surgeon, will want to think about putting their surplus income to work. Many individuals often generate income by purchasing properties to rent out, starting or acquiring businesses, or investing.

Controlling Debt

Many people like surgeons don't make it out of school without incurring some debts. Ideally, they want to control their debts. This doesn't mean paying everything off and never incurring debt again. Instead, it means paying down loans on schedule and refinancing them opportunistically when lower rates become available.

Once your debt is controlled, it becomes a tool for producing wealth. People use low interest rates to go into the stock market with leverage, borrowing money to invest. Similarly, low interest rates allow you to invest in your home as a store of wealth. The price of borrowing drops, and that makes paying for your kids' education cheaper, too.

Minimizing Tax Exposure

Like many other things, the tax system works to the benefit of those who know the rules. As such, there are many places to consider minimizing tax exposure, but a retirement account is probably the best one for starters. A working person with a 401k, for example, can reduce their tax bill by fully matching the employer contribution. Likewise, they can draw from it strategically later in life without realizing major tax events.

Pushing tax events out to save money is common to many aspects of wealth management. For example, if you can realize a capital gain a year from buying an investment, you'll pay less than you would if you realized the gain within a few months. Manage these little things well to reduce your tax obligations. To learn more, contact a wealth management company.