Budgeting as a Key Pillar to Holistic Wealth Management

Holistic wealth management goes beyond traditional wealth planning, and it takes into consideration various facets of life. It recognises that true wealth encompasses more than just monetary assets; it involves health, relationships, personal fulfilment, purpose, overall quality of life and the list just goes on.

As we examine and ponder on the various facets of life that contribute to true wealth, it isn’t difficult to realise that money, to some extent, is a common factor that needs to be present. Since money is required in every aspect of our lives, budgeting becomes a key and fundamental pillar to the success of executing a holistic wealth management plan well.

Why Budgeting Matters for Accumulators

Developing the habit of budgeting and building up our money management skills early is a form of financial self-care that reaps many benefits.

  1. By starting early, we get into the habit of sticking to the plan and it becomes easier to be disciplined with our money when our financial situation gets more complex in the future.
  2. Compounding is said to be the eighth wonder of the world and compounding works best with ample time. So, when we start budgeting early and become mindful about setting aside and investing a portion of our income, we will be generously rewarded for starting early.
  3. Lastly, starting early gives us sufficient time to make corrections to our wealth plans if they are not progressing the way we expect them to be.

Strategies to Budgeting

There are many budgeting strategies out there. Zero-Based Budgeting, and Pay Yourself First Budget are some of the more popular budgeting strategies. Ultimately, the spirit behind all these strategies is to prevent us from overspending.

One method that we have been advocating is the 3-Account method and this is a very intentional and simple way to budget.

  • The first account (let’s call it the income and variable expenses account) is where our salary will be credited into and where we will use the money inside for variable expenses.
  • The second account (let’s call it the savings/investment account) is where we will use the money in there for savings or investing.
  • The third account (let’s call it the fixed expenses account) is where our fixed expenses will be paid out from.

After we have decided how much savings/investment we would like to set aside, we can then allocate the remaining amount for our fixed and variable expenses.

So, every month, when our income gets credited into the income and variable expense account, we will set a standing instruction to transfer a pre-determined amount into our Savings/Investment account and into our fixed expenses account. After our payday and after all the automatic transfers, whatever is left inside our income and variable expense account will be the amount left for our variable expenses.

It is a very intentional way of budgeting, and the benefit is that this 3-Account method allows us to have a clear idea of how much we are left to spend on our variable expenses while at the same time it encourages us when we see our savings/investment account growing every month.

Budgeting, while it sounds very basic, is a foundational starting point to holistic wealth management and it is a very powerful tool that allows accumulators to take control of their financial future. By being very intentional about our spending and practising financial discipline, accumulators can build up healthy savings, reduce bad debts, and accelerate the growth of their wealth over time.

This is an original article written by Toh Zhi Han, Client Adviser at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.

*Providend is very excited to share that we are now ready to extend our service offerings to the younger accumulators who are looking for holistic, independent, conflict-free wealth advice!

For this group of younger accumulators, we know that it is not easy to make retirement planning a priority when other financial goals – buying a first home, for example, or saving for a child’s education – appear more pressing. Learn how we can help here.

Being a trusted adviser to our affluent clients for over two decades, we know that our clients need the reliability and sufficiency of investment returns to meet their needs. You can learn more about our purpose-driven approach towards Wealth Management and Investment Management.

We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.

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