Be Your Own Best Advisor: Learn These 6 Fundamentals for Wealth Management

By Patrick Rush

There is no shortage of information someone can find on the internet, and that’s part of the problem for people trying to make the right investment decisions.

There is an overabundance of information, so much that it can make your head spin. The solution to this information-overload issue isn’t always to hire a financial professional because picking one who is working more for their own benefit rather than that of their clients can lead down the wrong path.

The key is first educating yourself in the fundamentals of financial planning. The wealthiest Americans have grown their fortunes by understanding financial basics and following a set of fundamentals.

While there are thousands of complicated ways to invest your money, there are only a handful of proven ways to grow wealth. Keep it simple.

Here I offer a six-point set of fundamentals people can learn to help with their wealth management:

• A financial plan.

  This is the most important tool to help you build wealth and confidence. Everyone should have a financial plan in place before they start seeking investment recommendations. That plan should address budgeting, expenses, insurance, investing, long-term care, estate planning, tax-planning benefits, and other matters critical to long-term financial success. It also establishes a list of specific financial goals.

• Evidence-based investing.

  This approach maximizes returns by pursuing a proven investment strategy backed by facts, reason, and historical data. It’s a rational, scientific process to determine where to put your money to best make it work for you. Evidence-based investing helps prevent chasing hot equities at their peak and panic selling. Those kinds of fear-based decisions cause investors to buy high and sell low, he says, which eats away at your portfolio over time.

• A portfolio paycheck.

  Retirees get anxiety wondering how they’re going to live comfortably when they don’t have their former paycheck coming in. The key is finding the right way to draw a paycheck from your portfolio without taking unnecessary risks that could jeopardize your life savings. Your cash needs will influence how aggressive or conservative you’ll want to be in retirement.

• Taxes, and how efficiencies can benefit you.

  Tax law is confusing in the best of times. Since the passage of the Tax Cuts and Jobs Act of 2017 and the SECURE Act of 2019, more people than ever are uncertain about how the law applies to them and how to optimize their tax situation. There are ways to avoid costly mistakes. Prudent asset allocation helps investors defer or eliminate taxes. If you do only one thing to create a tax-efficient portfolio, max out your 401(k).

• Choosing the right healthcare.

  A study by Fidelity Investments found that a 65-year-old couple retiring in 2019 will need $285,000 to cover medical expenses through retirement. Formulate a plan for your healthcare needs ahead of time. A major medical emergency or long-term illness can devastate your finances. Most elderly Americans will need long-term care insurance at some point.

• Charitable giving.

  Donor-advised funds are a tax-efficient way to give to charity. Qualified charitable contributions are especially attractive to individuals who have reached the Required Minimum Distribution age of 72, when you have to start withdrawing funds from an employer-sponsored retirement plan.

The means of building and maintaining wealth are not a secret. But many people have not educated themselves on the fundamentals. Learning them can help you retire with confidence.”

Patrick Rush (www.patrickrushtfa.com), the ForbesBooks author of the Amazon Bestseller Gain Big and Give Back: Financial Planning with Intention, is the CEO of Triad Financial Advisors. He is a Certified Financial Planner and NAPFA-Registered Financial Advisor. With more than two decades of experience, Rush has received national recognition as a top financial advisor by Forbes, Barron’s and the Financial Times, and Triad Financial Advisors was recognized by the Invest in Others Foundation as a “Charitable Champion.”