Wealth Creation – Strategies for Creating An Abundance of Fruitful Financial Resources

Wealth creation might seem like a vague term or buzzword success gurus use. But wealth creation is simply the process of accumulating and growing financial resources to achieve financial independence and security. It begins with a mindset and strategy that you can use to build and maintain financial stability. The wealth creation process involves identifying and pursuing opportunities to increase income, reduce expenses, and invest in assets that appreciate over time.

Steps to wealth creation

An important step in wealth creation is managing your personal finances. No matter how much you earn, not knowing how to manage your money will make it difficult to create wealth. Most likely, you’ve heard stories about high-earning celebrities who ended up broke because they couldn’t manage their money.

Managing what you earn is important because spending more than you earn means there’s nothing left to invest. It also results in consumer debt, usually in the form of credit card debt. For this reason, financial planners recommend paying off high-interest debt as a first step. In addition, reducing expenses and creating a budget will help you begin creating wealth. Once this has been achieved, learning to manage your finances will make it possible to have money left over to start investing.

Another important part of wealth creation is knowledge. There are many investment options available that you need to understand. Jumping into an investment because it’s the latest fad or getting a hot tip from a friend or relative usually ends in disappointment. Taking the time to learn about various investment options – and their pros and cons – will help you make informed decisions about investing.

Some of the many investment options available include superannuation, individual shares, managed funds, investment bonds, savings accounts and property. The types of investments you choose will depend on your overall financial plan and your risk tolerance. Taxes are another important consideration when investing. You also need to know about products to protect your wealth, which includes life insurance and other types of insurance.

Once you have the knowledge and a plan, one of the key components of wealth creation is creating multiple income streams. This can be achieved through investing in stocks, bonds, real estate, or starting a side business. Additionally, reducing expenses, such as cutting unnecessary bills or creating a budget, is a critical step towards wealth creation.

Finally, wealth creation requires discipline and patience. Building wealth takes time and effort, and staying committed to a long-term strategy is important. This can mean resisting the temptation to spend money on unnecessary items and focusing on their financial goals.

How can a financial planner help you with wealth creation?

While budgeting, educating yourself and setting a plan are good first steps, having someone by your side is helpful to assist with your wealth-building strategies. A financial adviser fulfils this role in several ways. Financial advisers:

• Have the expertise and experience to help people make informed decisions about their finances. They have completed many hours of structured education in addition to work activities to become a financial adviser. With deep knowledge and experience, they can provide personalised advice and guidance on various investment strategies and help you develop a wealth creation plan that aligns with your goals and risk tolerance.
• Can provide an objective perspective on your financial situation. With many aspects of life, it’s easy to become biased or get set in our ways. A financial adviser can identify areas where you might be overspending or under-investing and provide practical solutions to improve your financial standing.
• Have access to a wider range of investment opportunities than what is typically available to the general public. They can help individuals diversify their portfolios and reduce the risk of investing.
• Provide ongoing monitoring and review. A financial adviser can help individuals keep track of their progress and make necessary adjustments to their wealth creation plan as market conditions change. This ongoing monitoring and review can help individuals stay on track towards their financial goals.
• Provide peace of mind. Working with a financial adviser can give individuals peace of mind, knowing their finances are in good hands. Financial advisers can help remove the stress and confusion often associated with managing personal finances, allowing individuals to focus on other aspects of their life.

In summary, having a financial adviser can provide individuals with the expertise, guidance, and support they need to achieve their wealth-creation goals.

What prevents people from getting financial advice?

Despite the benefits, many Australians don’t use financial advisers. Research by ASIC revealed that only 12% of people consulted with a financial adviser in the past 12 months.^[1] Some of the reasons for not seeking financial advice are:

• Thinking that it’s only for wealthy people
• The perceived cost of working with a financial adviser
• Believing they are too young – putting it off into the future
• Not understanding the benefits of receiving financial advice.

There are simple answers for each of these. While costs are involved, the benefits of getting advice include savings (including tax savings) and better investment choices and outcomes. Regarding age, getting started earlier means taking control of your finances sooner and having more time to plan savings and investments to generate results.

But what does the research say about the value of using a financial adviser? One study^[2] found that:

• Investors who received four to six years of accumulated advice had 60% more assets than those without advice.
• People getting financial advice for more than 15 years accumulated 290% more assets than others not receiving advice.

Getting financial advice also delivers a range of non-financial benefits. Research showed that those receiving financial advice have:

• Higher levels of overall happiness
• Greater peace of mind
• Improved relationships due to the alleviation of money-related issues

Starting your wealth creation journey

Getting started with wealth creation requires concrete decisions and action. Many business owners and professionals are so busy with their day-to-day work they overlook getting financial advice for personal wealth creation.

The team at FXW are ready to discuss wealth creation and how we can help make it happen.

Get in touch to start your wealth creation journey.

References:
[1] www.savings.com.au/news/nearly-half-of-australians-want-financial-advice-asic
[2] 8 The Gamma Factor and the Value of Financial Advice