After over a year of the Covid-19 pandemic, many have seen an increasing gap in wealth distribution in America. Eleven weeks into the pandemic, the world already saw a 42.6 million unemployed population versus a 19.15% increase in billionaire wealth. With such a sharp contrast, no wonder the general public is discussing ways to preserve and grow wealth in the difficult economy.
What is Wealth Preservation
To preserve wealth, we must first understand what wealth is. According to Investopedia, wealth stands for “the value of all the assets of worth owned by a person, community, company, or country.” It is calculated by subtracting all debts from the total market value of your physical and intangible assets.
In general, your goal is to preserve and grow your wealth. After all, nobody wants to work their entire life and only enjoy a few years of relaxation, whereas even such a simple goal is becoming more unachievable in the current economic landscape.
But the idea behind wealth preservation and development is not rocket science. To preserve means you will maintain your income and assets while avoiding an increase in debt. And to grow your wealth means you will utilize what you currently own to gain more.
Learn to Budget
Budgeting is a great method to use to preserve your wealth. Proper budgeting will show you a comprehensive overview of your current financial condition, including the market value of all assets you own and all your income.
A good budget should explain your cash flow structure and help you determine how much you can spend on each category, including rent, utilities, debt payments, and personal spending.
Save a Percentage of Your Income
Next, start saving a percentage of your income, preferably the moment you get paid, instead of waiting till the end of the month. While you may often hear people say you cannot save your way to being rich, saving is one of the foundational steps one should take as it helps you build up your initial funds to unlock more possibilities.
It is also best to have considerable savings, so you keep your retirement savings and emergency funds separate.
Use Tax-Advantaged Accounts
Put your long-term retirement savings into a tax-advantaged account.
The proper account type can help you further minimize tax liability and reduce your financial burden when you retire by providing you certain tax deferral (pre-tax) or tax exemption (after-tax) options.
Tax-deferred savings accounts include traditional 401k plans and traditional IRA accounts. After-tax investment accounts are also known as Roth accounts, such as Roth IRA and Roth 401k.
Learn the Basics of Investment
You don’t have to become an investment expert, but it is beneficial to learn the basics of investment, such as the forms of assets you can invest in, how short-term trading functions, and how stock, bond, mutual funds, and other assets may fit in your financial future.
Learning the basics of investment allows you to invest small amounts on your own until you’re ready to do something more systematic. It also helps you see the larger financial picture more effectively.
Be Properly Insured
Part of wealth preservation is about protecting your wealth. Therefore, being adequately insured naturally comes into the picture. Furthermore, the past year and a half have taught us that life is full of uncertainties. And as reluctant as you may feel about talking about the worst possibilities, you cannot deny that insurance is an effective shield against unpredictable risks.
And your insurance protects more than just yourself and your assets. It also protects your loved ones while giving you more resilience against unwanted situations, so a significant medical bill or accident wouldn’t push your entire household into despair.
Build Passive Income with Real Estate
Real estate has always been a method sought-after by the public to preserve and grow wealth. Rental properties, especially short-term rentals, are great ways to generate passive income, letting your money create more money.
Another popular form of real estate investment is property rehabilitation, also known as flipping. Investors purchase distressed properties and increase the home value by either remodeling a single-family home into multi-units or remodeling an old house and reselling for profit.
Another way to preserve and grow your wealth is by turning part of your monetary assets into precious metals. For thousands of years, precious metals are considered a safe way to store your wealth. That is because these metals, specifically gold and silver, tend to retain their value over a long time, regardless of how the economy and political situations may change in the world.
Use Comprehensive Financial Planning
Finally, one of the best ways to preserve and grow your wealth is with comprehensive financial planning. As the name suggests, this type of financial planning takes everything in your life into consideration and is, therefore, best done when working with a professional.
Your financial advisor will evaluate your current financial condition, short and long-term goals, risk tolerance, and essential things in your life. The financial plan will change as your life unfolds, so you don’t fall off track with your wealth preservation and growth.
The reality is, more Americans have to tap into their emergency funds and retirement savings every day. But, according to Pew Research, nearly half of Americans who are currently working have expressed concerns that the economic consequences of the coronavirus outbreak may bring them further back from reaching their financial goals.
Fortunately, this situation is fixable with the proper wealth preservation and growth approaches. We hope the tips above will help you steer your finances in the right direction. And remember, if you’re unsure about moving forward, you can always consult a fiduciary financial advisor as they’re required to hold your best interest as the top priority.
When you partner with a wealth management firm like BentOak Capital, you get access to our decades of experience in the financial world. We take a holistic approach towards managing your finances and striving to help you achieve long-term wealth. Contact us today and experience the difference of BentOak Capital!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historial is no guarantee of future results. All indices are unmanaged and may not be invested into directly.