While we often read about rags-to-riches stories in the news, there are just as many riches-to-rags stories out there. During the pandemic, the world’s top 500 richest people collectively lost over $1.3 trillion. Whether the pandemic affected your wealth or not, the fact of the matter is, you need to start planning your financial decisions carefully if you want to maintain your lifestyle. Sustaining riches across multiple generations requires a lot of work at your wealth planning, and a bit of luck.
Today, we’re talking to Bobby Gill from GC Wealth to discuss comprehensive wealth planning, see how you can calculate and minimize risks, and how you can teach your children to make the most out of their resources.
Without further ado, let’s discuss wealth planning…
Comprehensive Wealth Planning
Having an action plan will not only ensure that you have a plan for every situation, but it will also give you the confidence to make financial decisions at
Almost half of the people – 47% to be exact – don’t feel confident enough to make financial decisions on their own.
How can you come up with a financial plan? You need to start by making a comprehensive analysis of your current financial situation. First, gather the following information:
- Collect your investment account statements
- Life and disability insurance policies you have
- Homeowner and vehicle insurance policies
- Documents concerning your estate
- Calculate all of your income and expenses
Next, you need to see what financial goals you want to accomplish in the next few years. Some people will need to pay off any debts, while others will start setting up a trust right away.
Whatever the case may be, only when you have clear goals in sight, you can proceed with your plan. Then, you need to address the five key elements of wealth planning:
- Expenses: Set up a budget and cash flow projections
- Investments: See where your assets need to be allocated
- Protections: Assess the risks and find the right insurance
- Debt management: Find a way to pay off debt with minimum interest
- Tax management: Plan how to minimize tax costs over a certain period of time
Effective Risk Management
There are some things you simply can’t plan ahead. Illnesses, accidents, market crashes, and natural disasters – like the pandemic we’re all experiencing at the moment – are all things that can happen when you least expect it.
Hundreds of thousands of wealthy individuals have lost millions in the past because they weren’t prepared for these events. And that’s the only thing you can do. Hope for the best, but always have a backup plan if the worst happens.
Here are the basics of risk management:
- Lawsuit Risk: Talk to a lawyer about the ways to protect assets in case of a lawsuit
- Volatility Risk: Consider diversifying investments to protect yourself from volatility
- Disaster Risk: Having insurance is a good way to protect yourself from income loss
Family and Financial Responsibility
Low-income families have to deal with the fear of a lack of money. High net worth families, on the other hand, have to deal with other uncertainties.
Any person that has tried to come up with a long-term wealth management plan knows that their children have to be a part of the plan. Of course, this is easier said than done because teaching young people about financial and social responsibilities is a daunting task.
More than 50% of high-income parents are worried that their wealth will have a negative effect on their offspring. That’s why you need to start working on their financial education as soon as possible They’ll need some time to realize their responsibilities, so it’s best to start early.
Business Succession Strategies
In 7 out of 10 situations, the transfer of wealth from one generation to the next is unsuccessful. The failure usually comes only after the transfer is done, when the next generation is unable to invest and keep the money properly.
Often, the failure leads to internal turmoil that tears the family apart. If you want to help your family members avoid this, you need to have a business succession strategy in place. Here are a few important steps to succession planning:
- Figure out what you want to do after you retire and what will happen to the family business
- See who’s capable of leading your family business after you go into retirement
- Give other family members business responsibilities they’re best suited for
- Discuss your plans with the rest of the family to prepare them for the succession
- Put your plan into writing with the help of your accountant and attorney
Setting Up a Family Trust
A trust is a relationship that’s designed to help you hold assets. In most cases, the purpose of a family trust is to ensure that a person’s descendants are taken care of after the person is gone. While there are many different types of trusts, they all consist of 3 separate parties:
- The granter: A person that’s designing the trust
- The trustee: A person responsible for asset management
- The beneficiary: A person that benefits from the trust assets
Above-average wealth requires above-average wealth planning and effort. High-income individuals need to recognize that their financial situations are more complex than the average financial situation.
That means, high net worth people have to deal with more concerns than normal individuals.
You need to be prepared to deal with any situation if you want generations after you to preserve the wealth you worked so hard on accumulating.
About Bobby Gill, GC Wealth
Up until 2009, Bobby Gill was a corporate lawyer, working in some of the leading international law firms such as Allen & Overy, London and King & Wood Mallesons, Sydney. We advised high net worth individuals and organizations for more than two decades before starting a business on his own.
10 years ago, he started GC Wealth, his own private wealth strategy firm. Bobby Gill uses his years of experience to help private clients and educate them on wealth protection. Through GC Wealth, Bobby Gill has helped hundreds of wealthy business people manage and save millions.