5 Holistic Steps to Manage Your Wealth (As the Leader)

money briefcase | how to manage wealth


Updated May 2020

You may find yourself in the fortunate situation of having wealth, yet you may feel uncertain about how to manage wealth, having never really been wealthy before now.

Taking care of your wealth is sort of like parenting. You don’t know how until you’ve already done it but you feel like you need the expertise all along the way so you don’t mess up, big time!

Are you wondering how to manage wealth once you have it? There are 5 main steps:

  1. Create a plan with goals
  2. Lead your wealth toward those goals
  3. Decide how proactive you’ll be
  4. Select the types of investments you need for the results you want
  5. Employ yourself or someone else to invest your money   

In this post, I’ll take you through each of these steps after 40 years of investing and also working with financial advisors along the way.

My steps are a departure from the usual buy the S&P 500 index fund and a bond index based on your asset allocation or hire a financial advisor that does this for you. This is because I have found managing your wealth to be a holistic blend of life desires, personal finance tasks and investing.

In other words, it’s about way more than wealth since the money doesn’t matter if you’re unhappy with the life your money results have created. That’s why we start with what you want.

And there’s also the fact, like us, that you just may have to look beyond stocks and bonds to get there so keep reading.

Create a Wealth Plan

When you establish financial goals from an overall life and wealth plan, you clarify what’s important to you.

And when you have financial goals, you have to track your wealth as part of the process. This is an important element of managing wealth.

You may have created the standard financial goals that you did with a financial advisor, or in a program that’s based on investing in stocks and bonds. But dig deeper into what you really want in your life, and all of your options to invest. And think much broader than stocks and bonds, or just paying the bills.

Write down how much money you have now, and how much you want to have in the future, no matter where you are now.

Brainstorm how you can get there. Wealth begets wealth, so this will be fun if you have already accumulated some wealth.

How Much Money Do You Need for Financial Independence?

Like most people, you may not have any idea how much money you’ll need to live how you want.

A good place to start is with how much you spend now, and how much you want to adjust that to live the life you really want.

A popular rule of thumb is to multiply your annual spending by 25 since it would allow you to withdraw 4% a year to live after you reach financial independence, also known as retirement.

I think this formula can be used for a very rough estimate, but there are many others factors to consider that you can read about here in my post Retirement Withdrawal Strategies: Do They Still Work?

You may find that all you need to do to reach your goals is to let a certain amount of wealth compound until you want it. You can easily check this with a savings calculator.

Remember, though, the calculator results will be based on best guesstimates since life throws us curve balls like weird global viruses, zero interest rates, layoffs and financial crises every now and then.

Look to Your Future Self

As you’re doing your goals, ask yourself what will you do when you reach that next level of wealth? Think of how you can experience life fuller, help others or the do things you’ve only dreamed of doing before now.

Connect with how happy or peaceful it you’ll be when  you reach your goals and live how you want. This allows you to make that deeper emotional connection that will drive you to do the dryer aspects of managing your wealth, such as creating positive monthly cash flow, tracking your investments better or exploring that game changing alternative investment idea.

It sounds “woo woo” but it’s true. This process will help you stay inspired and on track.

And it will lead to managing your wealth well because you have your eye on the ball.

Read my post How to Create a Wealth Plan.


Lead Your Wealth

I’d like to share something that I discovered over the years which has really helped me: Be aware that you are the leader of your wealth. Most people think that if they hire a financial advisor or eager investor spouse, someone else is in charge of their wealth.

The next step, then, is to own your role as leader of your wealth. And if you’re married, remember that spouses very rarely die at the same time. At some point, one of you will be leading your wealth without the other.

In the media and our culture, wealth management gets interpreted as simply investing in stocks and bonds due to the billions of dollars made in this industry. Yet managing your wealth goes above and far beyond stock investing.

Here’s why. First, if you hire a wealth manager, you’re the person doing the hiring. This is a level above investing your money. Second, managing wealth is about much more than stock investing.

When you feel as though someone else is responsible for your wealth, it can lead to giving your power away on a deeper level.

Plus, you ease your attention on all the other important elements of growing and keeping wealth when you’ve neatly tucked away the thought that the stock and bond market will provide funds for life no matter what.

They may, and they may not.

how to manage your wealth as leader

Click here to read my post Wealth Management Tips for Everyday Investors  

Decide How Active You’ll Be

The next major step is to decide what type of investor you want to be.

With this step, you’ll decide which investing style you want to use, one that is more proactive or less proactive. I’ve noticed that many investors and financial coaching clients have never really considered this as a decision.

This lack of decision usually stems from my clients just assuming they can’t manage their own investments, again, given the societal messages.

Yes, there is a learning curve, but no, it’s not rocket science or I couldn’t do it.

And the reality is that if you use a financial advisor, you really want to understand the basics of investing anyway so you can hire and evaluate your financial advisor.

Read my related post How to Avoid Problems When Hiring a Financial Advisor and Pros and Cons of Hiring a Financial Advisor.

Investing Styles

There are three investing styles and you can choose the one that best suits your personality and skills. Financial advisors can also have these styles, hence the importance of understanding investing if and when you do hire an advisor as covered more ahead.

Passive Buy and Hold Investing

With this investing style, you’ll adhere to a buy and hold strategy buying stocks and bonds, usually in index type funds. You’ll experience bull and bear markets causing your net worth to rise and fall choosing to ride them out with this method.

This is the most common investing style, even among financial advisors. It’s also called passive investing. This is the easiest way to invest.

Usually, once a year buy and hold portfolios are re-balanced back to the desired percent of stocks and bonds. An example is 60% in stocks and 40% in bonds. This may sound complicated, but it is a simple process.

The simplest way to build wealth is to save a portion of your earnings and invest 25 to 30 years into low cost index funds or ETF’s with a buy and hold method.

Unfortunately, most people don’t realize this, or save money, until they no longer have 25 to 30 years before retirement.

Click Here to read my post How to Know if the Stock Market Will Go Up or Down or How Long Will a Million Dollars Last in Retirement?

Proactive Value Investing

Think Warren Buffett. With this style, you seek and buy undervalued investments and also gradually sell investments as they get overvalued.

This can be a several year process that requires a lot of confidence, patience and ability to go against the crowd, because for some crazy reason, most investors don’t like to buy investments when they are cheaper.

Some financial advisors will do this for you but, unfortunately, many financial professionals are under pressure (by clients or management) to stay almost fully invested even when valuations are very high. This practice allows investors (and advisors) willing to go against the herd to have an advantage.

Understandably, however, many investors want to buy and hold stocks and bonds long term because it’s a lot easier. It does take some time and effort to be able to recognize undervalued investments.

Like buy and hold investing, it’s not rocket science, though.


Combination of Proactive and Passive Investing

With this style, a combination of the two styles is used with a core buy and hold portfolio and a portion of the portfolio set aside for more tactical investing based on valuations.

With this style, you sort of can’t go wrong since you have a strategy that should always work.

Keep in mind that these styles can be applied to assets besides stocks and bonds, such as real estate and commodities.


Which Investing Style Is Better?

For every five financial experts preaching buy and hold investing there’s probably one preaching to buy undervalued assets.

It stands to reason that you can get more assets when they cost less. This is a core money principle that we apply all the time to groceries on sale but it often gets overlooked when spending big money on assets.

Nevertheless, studies appear at various time frames showing that a buy and hold investing style outperformed more tactical value type investing.

The reality is that the time frame being measured will determine which investing style performed better during that given time frame.

This is due to stock market trends and the economy. Looking to the past few years prior to the years you are evaluating can be a guide instead of relying only on long term averaged returns with the assumption of a repeat performance.

Note, too, that investment performance data is gathered and shown in a way that is most advantageous to the firm offering services. There is nothing wrong about this, since all companies use marketing that puts them in their best light.

Just be aware of this as the manager of your wealth. You’re the leader, so understand the numbers as you decide your investing style.

After you’ve chosen your investing style, you’ll need to buy investments.

Select the Types of Investments

Based on your goals, you’ll know if you want to focus on income or gains from your investments. While dividends can be awfully nice, stocks are most often associated with investing for gains.

Bonds, on the other hand, are most often associated with investing for income.

Read more about that in my post Are Dividends or Capital Gains Better? and How to Understand Your Investments or Wealth Building Vs. Income.

But wait, there’s more:) The next step is one most people don’t consider, again, due to all the media attention around stocks and bonds and the promotion of investing through institutional managed retirement funds.

This step is to decide if you will invest only in traditional investments, like stocks and bonds, which are sometimes called paper assets.

For the majority people who do not have enough wealth to live comfortably in retirement for life, slightly alternative investing wealth building can be a game changer. Examples of alternative investing are real estate and small business.

We found that alternative investing into undervalued income generating assets helped us reach financial independence earlier once we figured this out.

But we also like core investments in stocks and bonds, especially when they generate income and can be bought at undervalued levels, also.

Most people who do decide to invest in alternative investments also have wealth invested in stocks. For this reason, the next step to manage your wealth will be to decide who will manage your core investments.

Read my related post 12 Slightly Alternative Investments.

Decide Who You’ll Employ to Invest Your Money

The next step to manage wealth is to decide if you want to invest your own money or hire a financial advisor, wealth manager or financial planner.

I find that some of my financial coaching clients are intimidated about evaluating and hiring financial advisors.

But when you use the word employ it takes the intimidation out of hiring an advisor, making it another set of tasks that someone will do.

If you hire someone to invest on your behalf, you’ll pay them for a job that you’ll monitor as you lead. This is how you get the best results from hiring someone.

And if you decide to employ yourself to invest your money, thinking of it this way will help you take the job seriously by learning and paying attention to your investments.

Just know that it’s an important choice, and you get to decide what will work best for you as the leader of your wealth. The 3 main choices for who will manage your wealth are below.

Click Here to read my post entitled the Pros and Cons of Using a Financial Advisor. 

Manage Your Own Investments

If you decide to manage your wealth, you’ll most likely divide your money into stocks, bonds, alternative investments and money markets probably through chosen funds (mutual funds or ETFs) based on the amount you want (if any) in each.

While this can sound intimidating, this is simple to do with standard asset allocation models that are based on your age and chosen risk. It’s the cheapest and most proactive method here.

With this method you can even incorporate the investments or asset allocations recommended by proven investment experts in their newsletters or products making it even easier.

In fact, I now use and teach clients about a sophisticated asset allocation tool that many financial advisors use that is now available to individual investors who invest themselves.

Click Here to read my article entitled Should You Manage Your Own Money?

Use a Robo-Advisor

You can do the same index or ETF investing method as above but through an automated online platform. I have personally not used a Robo-Advisor. If you’re considering this, I would compare total costs to investing on your own into low cost index funds or ETF’s.

Most Robo-Advisors have financial advisor services you can use for a fee if you need them. Most likely, this advice will be based on the standard asset allocation models that you’ll use with DIY investing.

But you can always tweak your purchases on expert strategies as mentioned above.

Hire a Financial Advisor

Or you may decide that your time and energy are better focused on making more money, family time, or playing a few weekly games of golf.

If you decide to hire a financial advisor, note that a financial advisor can have many different names, certifications, fee structures and methods so, again, it’s important to know investing basics in order to understand and evaluate each of these criteria.

She may also have areas of expertise, such as retirement planning or income.

Note that most financial advisors don’t actually invest your money. Instead, they give it to someone else to invest, acting sort of like a middle man. You are paying for their expertise and the implementation of investing.

An advisor may invest your money in individual stocks, but usually it will be invested in funds, maybe even index funds, or placed with someone who invests in individual securities on your behalf.

Whether funds or individual securities are bought usually depends on how the advisor works and the amount of money you have the advisor invest for you.

It’s worth repeating that if you go this route, you’re still the leader of your wealth. As such, you’ll want to learn enough about investing to confidently interview, evaluate and manage any financial advisor you use.


Use a Free Financial Advisor

Many investors don’t realize you can access a financial advisor for free or at a low cost at many brokerage firms when you’ve invested certain levels with the firm. Sometimes legal and other wealth management guidance or services are included.

Such advisors recommend appropriate funds or wealth managers that you can access through the brokerage firm where they work. This can be a good way to invest a portion of your wealth on your own while having an advisor assisting you for some of your investing decisions.


How to Choose Who Will Invest Your Wealth

While investing on your own may sound intimidating, you’ll want to compare the cost and potential returns of investing on your own with that of using a financial advisor.


How to Manage Wealth Recap

When you establish and monitor goals, lead your wealth, choose how proactive you’ll be, choose the types of investments, and decide who will invest for you, you’ve covered the basics steps of managing wealth.

Now that you’ve seen the five major steps for how to manage wealth, you can decide what is best for you.

If you enjoyed this post, please share it on your favorite social media channel. Thanks for reading.

Camille Gaines

how to manage wealth

The information on this website is for education only and is not to be construed as personal financial advice.