End-of-quarter Financial Check-in
Now that we are at the end of the first quarter of 2024, let us remind ourselves that building wealth is a process that will not happen simply because you wish for it. In the absence of a large family inheritance or some other windfall, you must actively work to ensure that you build your financial health and independence and ensure that you can comfortably navigate difficult times.
Building wealth requires you to plan strategically; it is not something that you leave to chance. It also involves smart financial management and wise investment decisions that will help you not just to create financial resources, but also to increase them over time. The earlier you start, the more wealth you can accumulate, because it allows you to benefit from the power of compounding.
With this in mind, now is as good a time as any for a quick knowledge check on topics we have discussed in this space since the beginning of the year. The aim is to help you monitor your progress, identify knowledge gaps and the need for course correction.
1. Which of the following women (all the same age and all making about the same amount of money) will likely reach her financial goals faster?
a. Sandra, who saves a small amount occasionally in a savings account.
b. Jennifer, who buys expensive items of high resale value that she can sell later if needed.
c. Betty, who spends modestly, has a financial plan, saves, and possesses a diversified investment portfolio
d. Carlene, who uses credit cards for all her purchases but neglects to pay them off in a timely manner leading to increasing debt.
2. Which TWO of the following statements are true about buying life insurance to assist in wealth building?
a. The premiums are expensive and cut too much into your disposable income
b.certain life insurance products provide a taxadvantaged environment for wealth accumulation c. Group life insurance through your job is enough d. Insurance can build wealth for the next generation, so that a family does not find itself penniless if the major breadwinner passes away
3. Studies have shown that only about 30 per cent of wealthy families maintain their wealth beyond two generations. Which of the following does not factor into the strategic preservation of generational wealth?
a. A financial plan b. Real estate c. Investments d. Gambling
4. When is the best time to start building a retirement fund?
a. 20s-30s, at the beginning of your career b. 40s, in the middle of your career c. 50s-60s, facing the end of your career d. College days, even before you begin earning money
5. Which of the following statements about disciplined retirement planning are true or false? Select all that apply.
a. It involves making smart investment decisions that can help you grow your wealth over time
b.although it is a critical aspect of life, its importance is often overlooked
c. It aims to provide a security blanket for you in your golden years by taking advantage of compound interest
d. It can help you to travel the world, buy a second home, or even start a business
Mark Scheme: Answers: 1. C | 2. B | 3. D | 4. A | 5. All True
Less than 3 correct: You may have a significant knowledge gap and limited understanding of the financial concepts. Course correction to develop better financial habits may be necessary. Ongoing financial education and guidance from a wealth advisor will strengthen your chances of meeting your financial goals.
3 to 4 correct: You have a moderate understanding of financial concepts. However, there is room to improve financial management skills. Ongoing financial education and guidance from a wealth advisor will strengthen your chances of meeting your financial goals.
All 5 correct: You have a firm grasp of the financial concepts and are well on your way. However, do not be complacent. Ongoing financial education and guidance from a wealth advisor will strengthen your chances of meeting your financial goals.