Accumulating wealth: but ‘When is enough?’
Accumulating wealth is a primary goal for most of us, but it is of particular significance for younger generations. Most people born following ‘the Baby Boomers’ generation will probably live longer in retirement than the years they worked. Here, we say ‘enough’ (accumulated wealth) is the amount that you are satisfied will enable you to live comfortably. We assume that means you will achieve your lifestyle and financial needs, goals and objectives by your retirement date.
To each of us, that position of being ‘satisfied’ will mean different things. Each of us will likely require significantly different wealth to be accumulated. In this article, we assume financial goals achievement means –
- you have confidence in achieving this objective,
- you sleep comfortably at night, and
- you believe that your financial independence is assured.
Accumulating wealth; and wealth protection.
Setting goals:
Each of us has different goals – and over time our own goals will change as circumstances change. Consequential circumstances could include –
- some windfall gain, or
- some unforseen detrimental event,
- a significant change in health status might intervene in the progress, or
- an accident that renders you or someone in your family permanently disabled, (and requiring high levels of care).
All manner of changes in family structures can impact on our strategy for accumulating wealth
Collecting relevant data:
To determine how much accumulated wealth is enough, requires the collation of all relevant data regarding your current financial position. Assets, including superannuation; and liabilities, as well as available cash flow are required to be analysed in this exercise. Your advisor level will listen to the aspirations of investors as to what they would like to achieve financially whilst maintaining an acceptable lifestyle. This lifestyle includes concurrent provision for dependants – children, and/ or vulnerable dependants.
An individual aversion to investment risk is also required – gaining further understanding of them as an investor. Their financial expectations will be tempered in this process. Armed with all of this information puts our team in a position to strategise solutions to client needs, goals and aspirations to set them on the pathway to accumulating wealth.
Assessing available timeframe:
In many cases, the ultimate financial goal is ‘financially independent’ retirement. To determine whether sufficient wealth has accumulated for this objective, a projection is required as to the anticipated longevity of the investor, where they will live, what health they will ‘enjoy’, what lifestyle they expect during retirement and whether any other financial responsibilities will persist at the start of the anticipated retirement.
Calculating the adequate wealth target:
As complicated as all of the unknowns in the above may sound, it is possible to make an acceptable determination as to ‘what is enough’. Experienced financial planners can assist you to make those calculations – or to review your own process with you by way of confirmation.
Plan to protect:
Having satisfied yourself that you have the above calculation ‘nailed’, it is wise to consider whether self-insurance is a wise move – and if the attainment of the financial goal set above is ‘fragile’, then it will be much safer to outsource the financial risk that you can reasonably anticipate, through life insurance risk protection issued by a reputable insurer. If you take this path, then there is another ‘what is enough’ calculation to make: how much insurance protection will be required to ensure that any interruptions to the attainment of your goals will be minimal?
Whilst insurance available online (or as advertised on TV) may be convenient, it will be to your benefit to ensure that you understand which insurance product provides the protection for the identified risk, in whose name the policy should be held, what ‘conditions’ should be pursued – and to undertake a regular review of your insurance portfolio to ensure that you are neither under- nor over-insured.
To learn more – and get sound advice…
The experienced advisers at Continuum Financial Planners Pty Ltd are available to work through these processes and calculations with you: for personalised, professional wealth management advice from experienced advisers who listen to you, develop an understanding of your financial needs and (utilising effective processes) have solutions to your individual needs, goals and objectives, Contact Us using the facility linked to our website: and we are available by phone (at 07-34213456).
Links to other articles that we have posted on wealth accumulation strategies and on life insurance matters are –
- Greed is NOT Good;
- Strategic Wealth Management;
- Life Insurance protection from personal risk;
- Continuum Financial Planners Service: Risk Protection; and
- Continuum Financial Planners Service: Investment Strategies.
(This article was originally posted under the heading ‘When is enough?’ in October 2013 Its title was changed when it was updated and reposted in October 2015. It has occasionally been updated/ refreshed, most recently, in May 2024.)
