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Wealth Management and Money Management – The Difference
For many, money management and wealth management might seem like the same thing and this is a mistake that many new investors make. Those who are following the financial planning journey do not consider their financial needs as something that evolves. Essentially, they consider this to be a fixed set of activities that they have to continue for a long as required in order to get as much from it as possible. However, there is more to it than that and there are differences that have to be understood.
What is Money Management?
This is a process where people head off on a financial journey and once they begin to experience an income, the see how important it is to plan their finances, ensuring that they fall in line with their targets or goals. Effectively, this is money management and it is what people have a grasp of when it comes to financial planning.
What is Wealth Management?
This is different from money management as it is a process whereby investors grow their wealth by preserving it and channelling it in a way where they can benefit from it as much as possible. They use financial strategies and instruments available to them to achieve this. This is not restricted to making and updating investments because it also includes your complete financial cycle which includes all aspects of tax including revenue and assets. It is about taking your wealth and harnessing it, nurturing it and making sure that your wealth protects you but also continues to grow where possible.
The crucial thing here is that people determine the difference between the two but the fact that money management is important, even if you don’t have wealth. Money management and the practices involved in that are all aimed at setting your income on a path to generating wealth. In contrast to this, wealth management comes into play once wealth has been created.
So, money management is a pathway to wealth but to get there, you have to manage and plan accordingly. Once you get to a certain point, you should have amassed a wealth that needs to be managed and that, as an investor, is vital.
Therefore, whether you are in need of assistance with managing your money or your wealth, you need to ensure that you make use of professional advice and guidance.