The word ‘wealth’ is most often associated with material riches, but it also can mean enjoying good health, fostering strong relationships, building a sense of security and finding a purpose in life. That’s why a sound financial plan should be about more than investments and can vary so much from person to person.
Life is by nature uncertain, so we need a plan that gives us the best shot of reaching our goals and living the lives we each want to live in the meantime.
True Wealth is all about being with the people you care most about, with the ability to do the things that matter most to you, based on your deepest held values.
Building true wealth requires a mindset that that goes beyond just accumulating money.
A wealthy life is therefore not solely defined by how much money you have. It is rather about how you use your money to support your wellbeing.
Having the financial security to do this could be called financial freedom. This is, however, a term that is often misunderstood.
Financial freedom can be defined as the ability to live the life you want without being constrained by financial concerns. It doesn’t necessarily mean having so much money that you don’t have to work. It is more than possible to achieve financial freedom while still working for an income, provided you are secure in the knowledge that your earnings more than cover your expenses and you have enough of an emergency savings buffer should something go terribly wrong.
Financial freedom really means not constantly worrying about money. And research has shown that this is a key factor in overall life satisfaction.
True wealth is therefore more about building financial security than just accumulating money. That is what leads to a sense of financial freedom and overall well-being. And this is within reach for any of us if we adopt a few basic principles:
- Prioritise experiences and relationships over material possessions. In other words, have a clear sense of what you want to use your money for, rather than just accumulating money for its own sake.
- Invest in assets that appreciate over time. Investing in the stock market is the surest way for a long-term investor to grow wealth over time.
- Live below your means. You cannot accumulate wealth if your expenses are greater than your income as you will never be able to build up emergency savings and you will have no financial security.
- Set clear financial goals. Have a sense of direction and motivation for building wealth and achieving financial freedom and well-being.
Financial wealth is easy enough to define and quantify. Worth is more complex. It can come down to connecting financial goals to life goals. Everyone is different, which is a great reason to talk over this web of issues with your financial adviser.
Written by Jason Kirk (CFP® Professional, SMSF Specialist Adviser, GradDip. App.Fin&Inv, B.Econ), a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
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