Is Your Financial Strategy Actually Creating Wealth?
The year is quickly drawing to a close. How can you truly know that your wealth has increased?
Many people don’t review the progress of their financial planning. This is a critical mistake. Without this step, you cannot determine whether the complexities of the market are working in your favour. You need this data to understand if the effort you are making is producing great results or impeding your goals.
Just like monitoring a weight loss goal, tracking your financial planning should be a regular activity. You need to know how you’re doing on a monthly basis; or quarterly, at the very least.
To pursue this analogy, simply losing weight is not an accurate measure of your health. You need to track other variables, such as muscle mass, tone, and water content. Then you will know if you are truly losing weight or putting your health in danger with risky practices. Wealth creation needs a similar health check.
You might be able to look at your assets today and claim, ‘I’m worth a million dollars.’ But how are you determining this? Are you protected against a market correction? What about other variables related to your investments?
Let’s say the value of your home has increased 100% in 10 years. This is great news. But what if today’s historically low, sub-2% interest rates go up? If you have a mortgage, the higher cost of carrying it will dramatically affect your cash flow. So, is the value of your home a true indication of your wealth, if carrying costs take up the cash you need for investing?
By doing a financial health check regularly, you will learn exactly where you stand. Then you can choose your options. It’s critical to your wealth strategy.
Some day, you might change from the work you’re doing to another plan. You will need to convert your assets, perhaps into retirement income, or support for another venture. Doing regular evaluations of your wealth strategy will help you prepare for a great future.
Ask your Financial Advisor to help you check up on the health of your wealth.