How to prepare to grow your wealth effectively this year
NAVIGATING the financial landscape in 2023 has been nothing short of a rollercoaster ride, filled with uncertainties and market fluctuations.
the Us market has proven its resilience in 2023, showcasing impressive growth with the s&p and Nasdaq surging strongly.
However, with 2024 shaping up to be a pivotal election year in the United states, the future trajectory of these markets hinges greatly on the outcomes, poised to either ascend further or face potential upheaval.
According to Bank Negara, inflation rates for 2023 inflation ranged between 2% and 3%. However, in reality, inflation could be much higher, between the range of 8% and 10%, especially if your spending habits lean towards imported goods.
Furthermore, the 2% increase in service tax, which took effect on March 1, 2024, will further amplify these inflationary pressures.
Faced with these challenges, it’s easy to succumb to pessimism when it comes to growing your wealth for 2024. the kneejerk response often involves a frantic search for the “next big investment” in a bid to overcome these challenges.
However, as Warren Buffett aptly suggests, “the most important quality for an investor is temperament, and not intellect.” Building financial stability and investing for the future is a gradual, deliberate process.
reacting to fear or greed seldom leads to viable strategies, and exposes you to the risk of falling victim to scams and losing your capital.
since the start of 2024, many investors have been asking me about what they should focus on to grow their wealth.
As an experienced wealth management adviser with years of guiding investors through various market climates, i’ve seen the power of pausing to perform financial housekeeping before rushing into investment opportunities.
While it may seem mundane, it’s a strategic move that ensures your investment strategies are aligned with your financial goals and equipped to navigate the ever-changing financial landscape.
Life happens, and sometimes our financial goals evolve with it.
Are you sure your roadmap to wealth is still aligned with your changing aspirations? And even if your goals remain constant, hidden expenses can silently drain your finances like a leaky faucet.
Do you even know if you’re unknowingly sabotaging your own wealth creation? Finally, navigating the ever-shifting market landscape demands both cautious risk management and the ability to seize emerging opportunities.
Are you equipped to master this delicate dance between protection and growth?
this article unveils a proven wealth management framework that addresses these very concerns, helping you chart a course towards financial success in 2024 and beyond.
Is our plan keeping up?
Your financial journey is anchored by a holistic plan that takes into account your wealth-related goals and aspirations. However, life is ever-changing, and this could impact your financial goals and aspirations.
For example, you may have initially planned to set aside rm500,000 for your child’s tertiary education.
But upon revisiting this goal, you may realise that due to inflation and the weakening ringgit, you now need to put aside rm800,000.
therefore, it’s imperative to periodically review and, if necessary, revise this plan.
start by revisiting your major financial goals. Are they still aligned with your current phase of life?
Have there been any significant life events – a marriage, the birth of a child, a career transition – that call for adjustments to your objectives? Your financial plan should grow and adapt alongside you.
Next, you will want to project your current wealth growing pattern to assess if you are able to achieve these goals in the projected amount of time.
For instance, at Whitman, we assist our clients in running simulations on their net worth growth up to 90 years of age.
this way, our clients can visualise what to expect at different points in their life, and make adjustments if needed.
This is a crucial starting point for your housekeeping and is recommended to be done yearly or after any major life changes. Once you know your financial standing, you will be able to assess if you need to adjust your targeted return on investment (ROI) to meet these goals.
Are you leaking money?
The cornerstone of financial stability lies in understanding your cashflow. This entails examining your income sources, expenses, and savings in detail. Analyse your expenses meticulously and record everything. have there been any major changes in your spending?
A great way to track this is by outlining and documenting your budget, whether weekly, monthly, or yearly. Regularly revisiting your budget will help you avoid unpleasant revelations that may leave you financially strained later.
For example, a client of mine who once had an excess of RM50,000 in disposable income annually, got a shock of his life, when he revisited his budget and discovered that his cashflow was negative after enrolling his two children in international school. Additionally, purchasing property can unknowingly put you in a negative cashflow if you are not aware of all the expenses associated with servicing your loan and maintaining your property.
If you find yourself in a negative cashflow situation, it’s crucial to take corrective action immediately.
Are there areas where you can cut back without compromising on quality or lifestyle? For instance, in the example above, you may consider opting for learning centres that provide the same quality of education without the additional frills and at a fraction of the cost.
If you are not experiencing negative cashflow, that’s great news. however, it is still important to perform this analysis annually as it helps identify opportunities for growing your wealth. Do you have more disposable cash than before to invest? Or perhaps you want to invest in skill development to increase your earning potential. Optimising your disposable income will help you achieve your financial goals, and thus attain financial freedom more quickly.
Mastering risk and opportunity
Strategic asset allocation serves as the compass guiding your investments towards long-term ROI while managing portfolio risk. Regularly reviewing this allocation ensures that your portfolio remains balanced and aligned with your expected ROI.
evaluate the current composition of your portfolio. has market volatility caused deviations from your intended asset allocation? Rebalancing your investments helps mitigate risks and capitalise on emerging opportunities.
If you have financial goals overseas, such as the funding of your children’s tertiary education, ensure that the percentage allocated for foreign investment assets reflects this.
On the contrary, if you have no such commitments, it is recommended to keep at least 70% of your investments locally to meet local cash flow needs.
Consider the performance of various investment assets. Are there investments showing promise or underperforming assets that that have been losing money? What actions will you take to address these losses and protect your capital?
It is therefore critical for investors to actively monitor investment performance regularly to determine when to rebalance or cut certain underperforming investments. One cannot simply sit back and assume money will grow on its own.
evaluate how to grow idle cash more efficiently than keeping it in the bank. Be proactive in seeking opportunities and open to investments outside of your usual realm if they show promise. Some investors become overly comfortable in one asset-class, such as properties, and fail to
diversify their investments.
Grab the right opportunities
Regardless of the prospects in 2024, it is your approach that determines the success and failure of your financial growth. If you act in haste and out of greed, you may find yourself stuck with a poor investment decision that you will regret.
Financial housekeeping is not a onetime task; it is an ongoing commitment to expanding your financial well-being. By revisiting your holistic financial plan, cashflow statement, and strategic asset allocation, you equip yourself to navigate the complex financial world effectively.
Ultimately, the essence of financial housekeeping lies in empowerment. By pausing to review your current financial standing, you empower yourself to stay aligned with your goals, adapt to changes, and make confident decisions.
Make time to embrace this yearly practice, and you’ll not only manage your finances but also chart a course towards financial success and prosperity in 2024 and beyond.