Whether you are good at dealing with money is not a question that can be answered with right or wrong. It’s about how you think about money.
For example, when you take out certain insurance policies, the financial planner knows that you are thinking about your future.
Understanding inflation and investing your money to keep it moving is another positive sign for the financial planner. As well as the will to learn new things.
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Whether someone can handle money well is relative. Everyone has an individual connection to money and various financial experiences. These different impressions shape a person’s relationship with money.
Martin Scott, Financial planner and founder of “Lasting Wealth Principles“(A professional financial planning company) names three ways to help you manage money better.
1. You understand the value of asset protection
Although financial planning contains many different elements, it can be divided into two main categories: wealth creation and wealth preservation. Wealth creation means the accumulation and growth of wealth. And it is the main topic in most discussions about money. The importance of asset protection for a well thought-out financial plan is at least as important.
For the financial planner it is clear: if you understand how important it is to secure assets, you can handle money well. Asset protection includes adequate liquidity (e.g. for a financial emergency), insurance protection (e.g. health, life, legal protection and liability insurance) and asset planning.
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Why is it so important to understand asset protection? Martin Scott gives an example: John hired Joe as a financial planner. After reviewing the original budget, Joe discovers that John didn’t get legal expenses insurance. Joe recommends that John take out such insurance. John has no objections and takes out legal expenses insurance.
Seven years later, he can regularly and easily pay for his insurance, although he has not yet had to use legal protection insurance, for example. Then suddenly John is responsible for an accident with a large amount of damage. As if that wasn’t enough, he is sued. Since he already needs the saved money for the damage, additional legal fees would be difficult to manage. However, the legal protection insurance that he has paid for seven years now comes into play and he can seek legal advice – without using up all of his assets. That way, his assets will be protected by the insurance and not be too bad for his money’s continued growth.
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2. You understand how important it is to keep your money moving
Inflation is an underestimated risk to wealth creation. This is a sustained increase in the price level, which at the same time reduces the purchasing power of money. Hence, inflation is an important factor that should be considered in financial planning. It is imperative to keep money moving, because only if you compensate for the effects of inflation can wealth continue to grow.
Financial planner Martin Scott believes that thinking like this shows that the person is vigilant and is good with their money. Investments – for example in real estate, stocks or bonds – should be made dependent on individual criteria: your own financial situation, goals, time and willingness to take risks.
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3. You are ready to continue learning
If you are interested in learning new things, it will help you in all areas of life – especially when it comes to money. Overall, there is a lot of knowledge about financial planning. In addition, the financial market is constantly changing. But if you still want to continue learning, it shows the financial planner that you are making an effort and that you are careful with your money.
Of course, it is a financial planner’s responsibility to have the most extensive knowledge, but Scott explains, “I benefit from a strong interest from my clients. I love when clients ask questions because it shows a real interest in learning. One of my goals in life is to help others manage their money. This enables them to make better financial decisions and achieve their very own goals. “
This text was translated from English by Siw Inken Forke. You can find the original here.
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