Managing your wealth goes well beyond just crunching numbers.
Sure there’s plenty of math when it comes to wealth management, but there is also an element of art that goes into making sure your wealth works for your specific and often-changing needs, goals, and overall lifestyle.
That’s why in this guide, we’ll cover both the math and the art of wealth management with best practices and realistic tactics you can use to manage your wealth in a way that works for your life — no matter where it may take you.
What is Wealth Management?
The process of managing your wealth is multifaceted and consists of practice like budgeting, saving, investing, and even (wisely) spending your capital. For individuals, capital is mostly interchangeable with money, and most of us will generate it via a salary, business profits, investments, and other common financial sources.
Why is Wealth Management so Important?
The goal of managing your wealth is maximizing the value of your capital so you can apply it to your goals. Because, as we all know, goals — whether you’re thinking about next year’s vacation or how you can retire earlier to spend more time with your family — require funds.
And these goals are just one of the things you must know before getting into the nitty-gritty of managing your wealth.
Everything You Need to Know Before Diving Into Managing Your Wealth
First and foremost, to manage your wealth effectively you must know why you’re managing it. What do you want your money to do? Prioritize a list of short- and long-term goals. This list is something you’ll probably want to manage activity, just like you will your wealth — more on that later.
In order to effectively manage your wealth, you also need a clear understanding of all the assets that make up your wealth. Take a moment to gather and organize all your financial information in a way that gives you a broad view of what’s going on.
Especially important elements of the wealth equation that you’ll want to get cozy with are your income (money in), your expenditures (money out), any investments that you’ve made (in the stock market or elsewhere), and any debts you might hold (from credit cards, student loans, mortgages, and more). Getting intimately familiar with how these all play together in your financial life will help you grasp where you are and inform which of the upcoming tips will work best as you manage your wealth to meet your goals.
8 Actionable Tactics and Best Practices for Managing Your Wealth
Try any or all of the following tactics and practices to improve how you manage your wealth and achieve your financially-driven goals.
Simplify Asset, Portofolio, and Net Worth Tracking
Net worth is a calculation of the value of everything you own — minus what you owe (debt). Tracking net worth is important because it’s a widely-recognized number that can be compared against benchmarks to see where you stand.
Once you know your net worth, you can watch it over time to get an idea of how healthy your wealth is and whether it’s growing (usually good) or shrinking (usually not good). It’s also smart to keep an eye on your net worth after big life or financial changes to make sure your goals are still what you want them to be, that they’re still achievable, and that you’re still on target to hit them.
Net worth may be a big deal, but it doesn’t have to be a big deal to understand and monitor your net worth.
Kubera is a well-rounded, intuitive portfolio tracker for all of your financial accounts — just check out the full list of banks, brokerages, crypto exchanges and wallets, and financial institutions to which Kubera connects!
And it’s not just for monitoring your wealth that lives in accounts. Kbuera can track pretty much every type of asset, including:
That’s right, pretty much any traditional or alternative asset can be counted toward your net worth inside Kubera!
Kubera’s stock market and cryptocurrency trackers as well as integrations with leading asset experts (such as Zillow and EstiBot) go the extra mile to ensure you always know the real-time market value of your assets.
With all your wealth-making assets loaded into Kubera, you can do what you came here to do: view your net worth.
First up, there’s our Net Worth Dashboard where you can view your net worth number at a glance, as well as a chart of its growth.
Then, in our special-built Recap screen, you can see the most minute changes in net worth change over years or even days. You can even view changes in the value of your assets and how they contribute to your net worth. You may now know what each asset is worth, but how do you know if they were wise investments in the first place?
Kubera can automatically calculate IRR for investments for most of your assets. It takes purchase price, current value, cash flow changes, and holding time into account to display internal rate of return — all in your preferred currency.
With IRR in the currency you use every day, you can see how your initial investment has paid off and whether or not you want to sell or double-down on an asset.
Sign up and try out Kubera’s IRR calculator now!
Set Up a Retirement Account ASAP
If you’re reading this and you haven’t yet, one of the best ways to manage your wealth so it works for you is starting a retirement account.
An easy way to invest in your future is to participate in your employer’s 401(k) plan. If that’s not an option, set up an Individual Retirement Account (IRA). For either, you should be able to set up an automatic monthly contribution. It’s important that you actively revisit this contribution regularly — at the least, when you change jobs — to make sure you’re putting in as much as you’re comfortable with as regularly as you can.
Establish a Realistic Budget
While, at its core, a budget is a way to track money in versus money out; when it comes to managing your wealth, it can be much, much more than that.
Having a thorough (and realistic!) budget is really a starting point for reaching all of those goals that require money to achieve. A budget gives you the information you need to know to reach your goals when you want to reach them. A budget forces you to think intentionally about your financial habits, and once you have one set up it empowers you to stress less about expenses and feel confident in your future plans.
The personal finance pros at The Balance put together this really handy step-by-step guide: How to Make a Personal Budget in 6 Easy Steps.
Once you’re on your way to a functioning budget that helps you see how your money works and put plans in place for its future allocation, here are some important rules of thumb to remember about those expenses that we all have to think about:
Allocate at least 20% of your income for priorities. Everyone’s priorities will be different, but typically they’ll include saving toward emergency savings accounts, paying down debts, putting money in retirement accounts, etc. If money is tight, this is where it should go first.
If your priorities are covered and you're bringing in a comfortable income, put 30% of your income toward “lifestyle” expenses like dinners out, entertainment, and pretty much any reasonably-sized purchase that isn’t a basic necessity (like groceries, clothing, medical care, etc.).
If you’re budgeting to purchase your first home, remember that monthly mortgage payments should sit below 28% of your monthly income so you can plan accordingly.
And finally, a piece of advice we’re going to share in several different ways throughout this guide: Review your budget regularly and revise as needed! Your income as well as your goals will change with time, and so should your budget to stay true to life.
Invest Early and Often
When it comes to managing your wealth, time is one of your best friends.
The more time your wealth has to accumulate in investments — or high-yield savings accounts — the longer returns and compounding interest have to add up.
In fact, with enough time, the interest and dividends earned on what you put away can even exceed the amount you put in. It’s this fact that makes starting early so important when it comes to your retirement account.
In our opinion, everyone should try investing in the stock market as a means of wealth management and growth. It’s important to remember that time is the name of the game, so you should be willing to leave whatever you invest in the market for at least five years.
The best place to get started in the stock market is with affordable index funds and exchange-traded funds (ETFs). These types of stocks enable you to purchase a variety of stocks in a single transaction, which may mitigate your returns but can also mitigate the risks and management tasks that come with individual stocks.
For a walkthrough that’ll actually help get you started with your very first investment, check out this guide on How to Invest in Stocks from NerdWallet.
Rebalance Your Portfolio as Needed
Rebalancing means reviewing your portfolio’s allocations and adjusting them (by buying or selling certain assets) to line up with your current goals and risk tolerance.
Once you have a clear overview of portfolio performance with a tool like Kubera, you can actually do this quite effectively.
Rebalancing on a regular basis — at least twice a year is recommended — keeps your portfolio diverse, gives you a chance to make sure you’re still happy with your goals, and provides insight into whether anything needs to be tweaked to meet those goals.
More active investors can of course rebalance their portfolios manually. More passive types may be interested in automated “robo-advisor” investment platforms that do much of this work for you.
Pay Down Debt, Starting with the Highest Interest Rate
If you have different debts and are wondering how to prioritize paying them down, the answer is to always start with the one with the highest interest rate!
Interest is a fee you pay for the privilege of borrowing money. It goes into the lender’s pocket — not toward paying back your debt. That’s why you should always aim to have high-interest rate loans for the shortest amount of time possible.
Diversify Your Investments
Portfolio diversification simply means investing in various kinds of assets. The reason diversification is always recommended to investors is that it protects your portfolio from sudden losses that can impact a single market at any given time. A well-balanced portfolio contains a blend of assets that align with your risk tolerance while still generating returns that attribute to your goals.
Diversity can apply to what kinds of companies and industries you’re invested in, what areas of the world you’re invested in, and what kinds of assets you’re invested in. And, it’s an exciting time to be an investor because of a new asset class on the market: Digital assets.
In most cases, digital asset investments are those that exist in and are derived from the digital world. Right now, the most well known digital asset is cryptocurrency, but other digital assets include domain names, ecommerce stores and other websites, SaaS platforms, mobile applications, and more.
Considering that 80% of institutional investors have reported finding digital assets appealing and 40% have already added them to their portfolios, now is the perfect time to add in digital investments while you’re managing your wealth and thoughtfully diversifying your portfolio.
Manage What You Can, Let the Rest Go
Maybe one of the most artful elements of managing your wealth is knowing when enough is enough.
Our final piece of advice to you is to learn how to focus on the elements of your wealth that you can actively manage and not stress out too much over the rest.
Prioritize managing these elements over which you have the most control: How much you save, how much you spend, how you choose to allocate your assets, and how you behave with your investments.
Once you're comfortable with your system for managing the above, you might want to consider the things that impact your finances over which you have some control: Your income, your source(s) of income, and how long you’ll be generating that income.
Finally, there are elements that impact your wealth that you can of course keep an eye on, but over which you have no control: Taxes, market performance, and governmental rulings that affect your returns.
The best overall thing you can do to manage your wealth effectively is to focus on what you can manage and forget what you can’t.
Ready to learn more wealth management tricks? Read:
Manage Your Wealth Today, And Into the Future, with Kubera
What’s better than being able to manage your wealth to achieve your goals in this lifetime? Managing your wealth so that it helps your heirs achieve their goals even after your lifetime.
This is a part of wealth management that isn’t often talked about: Beneficiary management.
Often, the important documents upon which your wealth is built — deeds, contracts, and more — are left out of the wealth management conversation. However, it’s important that those documents are kept safe and end up in the right hands after your death if you want to ensure that your wealth keeps working for your future generations.
That’s why Kubera features a digital safe deposit box where you can securely store your most important financial and legal information. Our beneficiary management feature allows you to appoint a trusted beneficiary who will receive access to these documents — as well as your entire portfolio — once you are no longer able to manage them yourself.
Managing your wealth for your own goals as well as for future generations doesn’t have to be a heavy burden when you’re working with the right partner.
Work with a financial advisor? Help them bring their practice, and your experience, into this century with Kubera’s white-lable platform. Tell them to ask for a demo today to see how they can use Kubera to deliver fast, modern, and accurate portfolio management to their whole roster — including you.