By Evelyn Jacks
An interesting way to think about investing on an after-tax basis is to bring a strategy and process to the use of your money. Think of your money as a business, especially if your investable assets are in the high net worth range (over half a million dollars).
If you did this, what would you say is your vision for your capital? How would you like it to grow? How will you measure results over the longer term? These questions can help you develop a thinking process around the financial results you want. Following are some additional thoughts on developing a strategy and process for your investment activities.
Strategy. As people age, the amount of money required to fund needs and wants generally grows—to a point. In the early years, the emphasis is on basic survival; later on consumer wants; still later on self-actualization—that enviable stage when the client’s resources allows for the caring of others. At the end of life, health vulnerability can come into play—for yourself or your loved ones.
And so the purpose or use of your money, changes with different lifecycles. Readiness is key when it comes to those uses of money, which we at The Knowledge Bureau have broken down into four stages:
- Non-Discretionary Spending
• The funding of basic needs–food, clothing, shelter
- Discretionary Spending and Saving
•The satisfaction of consumer wants; and savings for emergencies
- Creation of Capital
•The use of money as a building tool: to earn income and create wealth
- Management of Sustainable Wealth
•The preservation of sustainable wealth from one lifecycle to the next
What stage are you in today? How is this influencing your investing and spending activities? What should you do be doing differently to prepare for Stage 4?
Remember: It’s Your Money. Your Life. Let us know what you think.
Next time: Planning and measuring your wealth
Evelyn Jacks is President of The Knowledge Bureau, a national educational institute focused on excellence in financial education, and a member of the federal Task Force on Financial Literacy. For information about self study courses and books visit www.knowledgebureau.com.