Why you should have a strategy for your wealth

It may be easy to feel on track when you’re making money. But simply making money doesn’t always translate to long-term financial success.

What is financial success? It could be a specialized degree, fancy house, philanthropic venture or comfortable retirement. All these things are possible with the right financial circumstances.

But to reach your idea of success – and build something lasting on top of it – you need to start by taking a pen to paper (or fingers to keyboard) and creating these goals, as well as a strategy for how to get there.

Why planning is the key to building wealth that lasts

Here’s a closer look at why wealth planning matters:

Wealth planning encourages you to aim higher

Let’s face it: There are many ways to invest. Someone can drop $10 in a brokerage account, set up a 401(k) (company willing) or round up their purchases with an investing app – you get the idea.

Unfortunately, a lot of people still don’t. And the cardinal rule for investing is consistency, so anyone making regular contributions to an investment account can pat themselves on the back. If you already took the step to invest, that’s great, but it doesn’t mean you should be complacent.

Here’s an example. You start a new job and decide to contribute 4% of your paycheck to a brokerage account through automatic contributions.

In a passive scenario, you work for the company for five years, receive a raise every year and never adjust your contributions. Naturally, there’s more money going into your brokerage account with every raise you get.

But if you were in a wealth-planning mindset, you would instead reevaluate your automatic contributions every time you get a raise. Increasing your contributions – even by as little as a percent – could make a difference in your investment returns down the line.

You’re much more likely to hit goals with a strategy in place

It’s good to set goals for your money, but the truth is you may not achieve them if you don’t have a strategy to get there. In fact, you’re 33% more likely to achieve your goals with a plan in place.

Creating a strategy could mean sitting down with a financial advisor. If that’s intimidating to you, you can start with a notepad.

It doesn’t have to be complicated. If one goal you have is to own 100 shares of a specific company, it’s simple mathematics to figure out how far you are from the goal and what you can afford to dish out each week or each month to get you there.

Wealth planning requires short-term and long-term goals

For wealth planning, you need to look at the big picture. It can be easy to zero in on the present and focus on how buying or investing in a specific thing will make you happy now.

Conversely, it’s also easy to think too much about future comfort and forget to allow yourself present luxuries. That’s why it’s important to set short-term and long-term goals for your money, so you can be satisfied now as well as in the future.

When you consider financial goals for the short term, that’s your next six months, a year or five years. Envision what you want from your life and your finances in these periods.

From there, you can build out a financial strategy for each time frame. An example of a short-term goal may be: I want to buy a house in three years.

Long-term goals cover the next 10, 20 or 30-plus years. For some, this could be the final stretch of a career or delving further into retirement, a stage when you should still be setting goals.

How to build wealth, step by step

Wealth planning starts with gaining clarity about your needs and objectives.

Know where you stand

The first step is to understand where you stand financially. Sit down and thoughtfully evaluate your income, expenses, savings and debt so you can establish a realistic picture of your financial position.

Define your financial goals

Next, define your financial goals. Envision both short-term goals – such as creating an emergency fund or saving for a down payment – and long-term goals, like building retirement savings or creating a legacy.

Focus on building a financial plan

Once your goals are defined, prioritize them based on short-term and long-term milestones. For most people, this might involve prioritizing needs like debt repayment or immediate savings while gradually directing funds toward longer-term goals.

Assess the resources and tools you have at your disposal. These will be different for everyone but might include employer benefits, tax-advantaged accounts and any other available investment vehicles.

Once you have an idea of your resources, it’s time to develop a personalized strategy to allocate those resources effectively. When you do, make sure you’re striking a balance between risk and reward to create a strategy that aligns with your financial goals and risk tolerance.

Monitor your progress

Your wealth plan shouldn’t be stagnant – but instead, should evolve to meet your changing needs throughout your life.

Periodically review and adjust your plans to respond to changes in market conditions, life stages or financial goals.

Get help when needed

Finally, seek professional guidance when necessary. A financial advisor or wealth planning expert can help you refine your strategy, optimize your resources and ensure you’re considering all aspects of financial growth and protection.

Again, wealth planning isn’t a one-time activity – it’s a continuous process where clarity, strategy and adaptability are key to building a strong, lasting financial foundation. Because of this, it’s smart to form a relationship with a professional you trust early on.

What to consider when setting financial goals for the future

To help you think through areas of challenge and opportunity, here are 10 topics the wealth planning process explores.

Cash flow

Cash flow is the foundation of sound wealth planning, giving you a clear understanding of how money flows in and out of your accounts.

This process involves analyzing recurring income sources – such as salaries, business revenues and investment dividends – against expenses – like mortgages, utility bills and discretionary spending.

When you’re managing cash flow well, it means you’re able to allocate resources toward essential needs, investment opportunities and achieving long-term goals.

A healthy cash flow also allows you to weather unexpected expenses without jeopardizing your financial stability.

Some questions to ask yourself include:

Investments

By strategically putting your money to work for you in strong financial markets, you can grow your assets and achieve higher returns than simply saving in traditional deposit accounts.

A well-diversified portfolio that’s tailored to your risk tolerance, time horizon and financial goals is key. This might include equities, bonds, mutual funds, real estate or even alternative investments, like private equity and hedge funds.

Take the time to regularly review and rebalance your investment portfolio to make sure it’s adapting well to changing market conditions while also staying aligned with your objectives.

After all, an effective investment strategy isn’t just about wealth accumulation – capital preservation and tax efficiency are equally important, especially as you near retirement or other significant life milestones.

Ask yourself these questions about your investments and diversification:

Estate planning

Another important part of securing your financial legacy is estate planning. By taking a proactive approach early on, you can protect your loved ones from unnecessary legal or financial complications.

This process includes drafting documents like wills, trusts and powers of attorney to outline how your estate will be managed in the event of your death or incapacitation. Estate planning strategies may also often include ways to minimize estate taxes and avoid lengthy probate practices.

Take the time to review your estate plan during major life events, like marriage, divorce, the birth of children or changes in tax laws. That way, you can make sure your wishes are still accurately reflected.

Think about these questions:

Life/disability/Long-term care (LTC) insurance

For many people, insurance is an afterthought. But it shouldn’t be, as it can protect you and your family from unforeseen risks.

Life insurance will ensure your loved ones are financially secure in the event of your passing by covering expenses like funeral costs, debt repayments and the replacement of lost income.

Similarly, disability insurance provides income replacement if you're unable to work due to a prolonged illness or injury. LTC insurance safeguards against the high costs of prolonged medical or personal care, like a nursing home, which can otherwise deplete your accumulated wealth.

Think about these factors:

Property and casualty insurance

Your physical assets – homes, vehicles and other valuable possessions – represent a significant portion of your wealth and must be protected accordingly.

Property and casualty insurance defends against risks such as theft, natural disasters or liability claims. For high-net-worth individuals, customized insurance policies might be a good idea to cover expensive homes, art collections or even high-value vehicles.

Remember, without adequate property and casualty insurance, a single catastrophic event could greatly impact your financial standing. This insurance might seem like a luxury, but for some people, it’s a smart choice.

Think about the following:

Education funding

Education is one of the most significant, and often expensive, investments you can make for your children or loved ones. Whether you’re planning for private schooling or college tuition, setting aside funds early means you can meet these future costs without derailing other financial goals.

529 plans, Coverdell ESA accounts and even custodial accounts are all ways you can save and grow your education fund in a tax-efficient way.

Ask yourself the following questions:

Wealth transfer planning/charitable giving

Wealth transfer planning enables you to effectively pass down your assets while minimizing tax liabilities and keeping your family relationships in good standing. Trusts and family partnerships are two tools you can use to ensure your wealth reaches the intended beneficiaries.

Similarly, if philanthropy is part of your vision, charitable giving strategies – such as donor-advised funds, charitable trusts or endowments – can align your values with your financial goals. These strategies often come with tax benefits that reduce the overall tax burden of your estate.

Ask yourself these questions:

Tax planning

Proactive tax planning will help you maximize your wealth and reduce your liabilities year over year. You’ll need to structure your financial activities in ways that take full advantage of available tax breaks, deductions and credits.

Strategies such as tax-advantaged retirement accounts, charitable giving or tax-loss harvesting will help you keep more of what you earn and invest.

The biggest question to ask yourself when it comes to wealth planning for taxes is:

Business planning

For entrepreneurs or the owners of family businesses, your company often represents a core component of your wealth.

Structure your business to minimize tax liabilities and protect your personal assets. You can also consider implementing key-person insurance policies or setting up buy-sell agreements to ensure the long-term stability of your business.

Think about this:

“One-offs”

Finally, remember that one-time financial decisions or even unexpected events can also significantly impact how you go about building wealth.

These include selling a property, facing an unexpected health care expense or receiving a windfall – such as an inheritance.

Some questions to consider include:

Wealth-building strategies when you don’t come from money

You might be wondering how you can meet your financial goals if you’re starting from scratch. This represents the vast majority of people. After all, not all of us were bequeathed large trust funds or inheritances when we set off on our own.

Here are some tips for building wealth that lasts, even if you’re starting with nothing:

Building wealth starts with setting goals for your financial future

Having a solid idea of how to build wealth (and what strategies you should follow to do so) isn’t a one-off task.

Rather, it’s a lifelong commitment to ensuring your financial future is aligned with your goals and aspirations. Taking the time to understand where you stand financially, defining clear objectives for both the short- and long-term and creating a thoughtful, strategic plan can set the stage for lasting financial security.

After all, wealth isn’t just a measure of assets. It’s a tool to enable and enrich your life’s greatest priorities, as well as lay the foundation for a life well lived.

With the right plan, your financial potential is endless. Start today, take charge and make every decision count toward building a legacy that lasts.

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