Now that the markets and economy has stabilized and estate sizes may have changed, as well as the...
How Efficient Is Your Money?
Money inefficiencies can occur in all areas of your financial plan. They erode wealth and can limit us from building sustainable long-term wealth. These wealth eroding factors include taxes, inflation, market risk, accidents, disability, death, and lawsuits. We want to mitigate these factors to ensure that our money flows efficiently through our financial plan and increase our chances of achieving our goals.
A common example of money inefficiency that we often see is with some of our client’s auto insurance policies. When they first set up their auto coverage they were younger, had less disposable income and thus opted for a low deductible insurance policy. In reality, if they were to get into fender bender they may pay out of pocket rather than have their insurance get involved. In this case it could be much more efficient to increase your deductible to be higher yet still affordable to lower your monthly payment since you will pay out of pocket for small claims anyways. Another example has to do with an overlap in coverage between homeowners insurance and umbrella insurance. Many people can lower their monthly premium payments by making sure you are not paying twice for the same coverage.
For reasons such as these, it is very important to take a macro look at your finances rather than a micro approach. Different types of micro-managers in regards to your finances are your Banker, Property & Casualty Agent, Real Estate Agent, Attorney, Accountant, Money Manager, and Life Insurance Agent. Each of these managers typically focus on their small part of wealth management plan, but how do we know that an action or recommendation from one manager works efficiently with the actions of another? Here at Virtus Wealth Management we act as a macro-manager. We have a process in place that seeks to remove inefficiencies and make sure your financial plan is organized and coordinated to help you pursue your goals.
This process starts with the building block of any wealth management plan, protection. These are all of you various insurances, wills, and trusts that we use to reduce risk, protect our assets, and protect our families. We analyze the premiums, deductibles, and coverages of all your protection elements to ensure that everything is working together and there are no inefficiencies limiting your flow of money.
Once we have rid our protection elements of inefficiencies, we analyze your savings to make sure they are both sufficient and efficient. There are several factors in play here including reducing risk, increasing liquidity, earning higher interest, and saving on taxes.
After we know we have sufficient and efficient savings in our financial plan we can then focus on the growth of our assets. Here our primary objectives are to increase our rate of return, minimize our tax burden, reduce risk, and in some cases provide income.
Taking a macro approach to your finances is the only way to rid your financial plan of money inefficiencies. In doing this you can improve your chances of eliminating factors that can erode wealth and improve your chances of building sustainable long-term wealth for now and future generations to come.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized advice.