In our previous article, we explored the differences between wealth creation and wealth preservation. We received replies from many to enquire about how to preserve their wealth. In this article, we will outline, amongst others, 5 of the best strategies to preserve your wealth.
1. Comprehensive Financial Planning
Comprehensive financial planning enables the effective management of all your assets. It helps you determine strategies to protect and build the wealth of your family. Comprehensive financial planning includes the management of cash and debt, investment planning, taxes, retirement planning, estate planning and risk management.
To learn more about comprehensive financial planning, click here to talk to one of our registered financial planners.
2. Capital Allocation
Furthermore, you need to move around your resources. You can allocate your capital in a way that values are created. Storing up money and wealth is fearful behaviour. Successful investors put their wealth to work, not to rest.
One of the best ways to allocate your money is to do pre-planning. Many have neglected that funeral expenses experience inflation too. Pre-buy your future home can save you a considerable amount of money. Bear in mind that pre-planning and death are total strangers. Avoid superstition and start allocating your wealth wisely.
3. Risk Management
Effective risk management is a vital part of protecting your hard-earned wealth. Many families have lost considerable portions of their wealth in the past because they did not prepare for risks such as market volatility and loss of income.
The graph below shows 4 most common risks which we might face. In spite of this, there are various ways to ensure the protection of your assets. For example, liability insurance, long-term medical insurance, diversifying your investments, etc. Risk management is critical to financial serenity. If you want to achieve financial security, you need to make a few changes.
4. Implant Financial Responsibility in Your Children
If you have built your wealth through years of hard work, you are probably aware of the true value of money. However, this essential value might not be shared by your children and grandchildren, who have grown up in a more privileged environment.
If you want your wealth to last across multiple generations, you will first want to prepare your children for financial responsibility. There are various strategies that can help you in this regard. For instance, you can demonstrate the value of saving, encourage comparison shopping, set goals for their demand, etc. This discipline will ensure their future success and your hard-earned wealth will not dissipate in just a blink of eyes.
5. Testamentary Trusts
You can also create testamentary trusts through your will and it takes effect only upon the death of the testator. A testamentary trust helps to preserve your assets. A normal will without a testamentary trust provision would leave assets directly to beneficiaries. However, with the creation of a testamentary trust, your trustee will still retain discretion in handling the assets. So that when your beneficiary later becomes bankrupt or encounters unfortunate events, your wealth can be still preserved.
You can also prevent your assets from being dissipated prematurely. Because your trustee will have the discretion as to whether your assets should be retained or to generate future income for your beneficiaries. Testamentary trusts are ideal if you have beneficiaries who are unable to handle a lump sum benefit responsibility. This way the beneficiary’s inheritance is protected and preserved from waste and dissipation by the beneficiary.
Do It Right
Preserving wealth requires a mindset and discipline that avoids huge losses. If you do it right, wealth preservation will not only benefit you, but also your family.
We have almost 30 years of experience in holistic life planning. It is done through professional estate and financial planning. Each customer is regarded as our family where their interest is the paramount consideration. We seek to understand the needs and priorities of our clients to develop tailored-made solutions in order to meet specific needs. To date, we have helped thousands to plan and have solid protection for their financial security, before and after.
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