It’s almost the end of the year and a topic many of us have on our minds due to high inflation is wealth management and creation. On top of that, excessive spending during the holidays can leave you with a financial hangover in January that doesn’t find relief for months to come. Creating and managing wealth requires a strategic approach in the following areas: making money, spending less, and investing more. Most wealthy people abide by the following these wealth management solutions to build and maintain wealth.
According to Statista, wealth management is big in Canada, with assets under management projected to reach $1,999.00 billion in 2023. The market is set to reach a massive $2,099.00 billion by 2027 at an impressive annual growth rate of 1.23%. Not joining the bandwagon means you may miss out on wealth-building opportunities.
With 2024 approaching fast, it’s a great time to review your financial goals and define realistic long-term resolutions for the coming months. Here are wealth management resolutions to start 2024 on a growth-focused note:
Outline a Comprehensive Financial Plan
Experts recommend updating your financial goals and plans at least once a year. Get a jump start by doing this before the new year begins. Outlining a comprehensive financial plan should be on your New Year’s resolution checklist. Before you create your financial plan, it’s necessary to determine your current financial situation. This includes identifying your assets and liabilities, finalizing your wealth goals, and creating a roadmap to achieve them.
Make a list of all of your expenses including rent/mortgage payments, utility bills, property taxes, home and auto insurance, gas/public transit costs, Internet and phone bills, groceries, clothing, fitness memberships, and entertainment expenses. Also, consider long-term elements such as investing, tax planning, and retirement planning.
Pay off Your Debts
One of the first things you should do to increase your wealth is reduce your current debt. Debt reduction is one of the easiest wealth management strategies since it simply means paying off your credit cards before buying unneeded items. In Canada, household debt currently sits at 107% of the GDP, which tells you that we need to make reducing personal debt a priority.
You can lower debts by consolidating all of your debt (loans and credit card balances) on to a low-interest credit card. After you’ve done this, go through your monthly expenses with a fine tooth comb and determine which expenses you can cut and eliminate for, say, a 12-24 month period. Besides alleviating stress (which is a huge benefit!), reducing your debt frees up your money to be redirected towards savings and investments. For example, when I decided to quit smoking many years ago, I eliminated an expense of approximately $175 per month. I decided to put that $175 a month into a mutual fund, which grew to several thousands of dollars. By eliminating some unnecessary expenses and investing more, you can move in the direction of financial independence and growth.
Diversify Your Investment Portfolio
Resolving to diversify your investment portfolio can help you achieve your wealth goals.
Investing across various asset classes such as stocks, bonds, real estate, precious metals, and cryptocurrency can mitigate the risks of market volatility. When investing in stocks, you should learn about overbought stocks, which are stocks that are overvalued, so that you can spot them. With these stocks, there is often a chance of a price correction, so selling them is a wise move before they lower in value. Identifying them requires technical analysis, so you may want to seek professional help to choose your stocks wisely.
Build a Robust Emergency Fund
Saving for a rainy day is a wealth management resolution you should follow every new year, and 2024 is no exception. It works like a safety net, protecting you from financial emergencies that crop out of nowhere. Unfortunately, one in four Canadians is unable to cover an unforeseen expense exceeding $500.
Building an emergency fund is the best way to stay safe from such a situation. A robust one sets aside at least six months of living expenses. The funds should be liquid and easily accessible, ensuring you can withdraw them in a crisis such as a medical emergency, urgent home repair, or job loss.
Develop Alternative Income Streams
Wealth management solutions can also include developing alternative income streams in addition to your primary job or business. The side hustle culture is big in Canada, with a recent survey revealing that 28% of people are adopting them, up from 13% last year. There are plenty of side gigs and projects talented professionals can pursue including web development, consulting, writing, teaching, accounting, pet sitting, and various home-based businesses.
Another way to increase your wealth is by investing it in revenue-generating assets, such as rental income from residential or commercial properties and even interest on deposits. The more streams you develop, the faster your wealth grows.
Wealth management resolutions are like fitness resolutions, taking you a step ahead with your money goals in the new year. Besides following the above recommendations, you should commit towards improving your financial literacy by reading financial newspapers and websites or listening to podcasts to ensure lucrative and risk-free growth in 2024 and beyond. You can also seek professional guidance to build your wealth and manage it.
You may be interested in reading, “New Year’s Resolutions: To Make or Not To Make“.