Even though by now, many of us have heard of wealth management, there can be some confusion around what exactly it is and how one can determine one’s net worth. In this article, we will discuss some key terms in wealth management and what they really refer to. We will also lay out a step-by-step plan for the uninitiated on how they can get started securing their financial future.

Key terms in wealth management

Wealth management revolves around two key terms: asset and liabilities. On a balance sheet, an asset is an item that you have or own that provides future economic benefit for you. Liabilities, on the other hand, are what you owe other parties. When you subtract your liabilities from your assets, you figure out your net worth, which is the key driver of wealth management.

Assets include:

  • Cash

This is the cash you have on hand, and any money you have in your savings and checking accounts. When needed, you can pull out this money quickly and access it. It also includes the cash value of life insurance policies that you have taken out.

  • Fixed income investments

Fixed income investments are investments that give you a steady return over time. Most notably, these are bonds, government securities and funds, and municipal bonds and bond funds.

  • Investments

Investments include assets in the financial markets that you hold, and these include stocks, ETFs, mutual funds, collectibles, commodities, and more. They are called investments as you have bought them with the hopes their value will appreciate over time.

  • Real estate investments

Real estate investments include any land you own or any property under your name that produces income. They also include REITs (Real Estate Investment Trusts).

  • Personal assets

Personal assets can also add to your overall net-worth as they hold value, and these include any jewellery, household furnishings, first, second, and third homes, and automobiles you fully own and have paid off.

  • Businesses

Additionally, you may have business ventures you are a part of, in which there is money tied up. As long as your business is expanding and your revenue is growing, this is an appreciating asset.

  • Retirement-oriented assets

Finally, you have retirement-oriented assets such as traditional retirement savings accounts, employee purchase plans, annuities, and pension plans.

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Liabilities include:

  • Short-term debt

Debt is something that you owe to other parties. Short-term debt can come in the form of credit card debt, your monthly mortgage payment, rent, insurance premiums, taxes, and utility bills.

  • Intermediate-term debt

Intermediate-term debt includes any loans you have taken out for your education, a vehicle, or a property. These can be paid off, but it will take years, or even decades.

  • Long-term debt

You may also have long-term debt, such as any real estate or property you are looking to develop.

Now that you are familiar with the key terms in wealth management, you can start looking into how to calculate your net worth and devise your own savings plan based on it.

How to get started with wealth management

Getting started with wealth management does not have to be too difficult. By following these steps, you too can create a solid savings plan.

  1. Determine your financial goals

When you get started with wealth management, you will be met with the question – why are you saving? Common answers to this include saving for a mortgage, to move abroad, a wedding, to raise children, to pay tuition fees, and for retirement.

Determining your financial goal is the first step to setting up your savings funds because it can help you understand more about the exact amount you are trying to work towards building, and the time you will have to do so.

For example, if you are working towards saving up for your newborn’s university fees, then you have a rough estimate of how much it will cost (accounting for inflation over the years) and how many years you will have to acquire this money.

However, what if you are not working towards any major life goal? If you are just starting out working and you decide to start a savings plan with no immediate goals, that is even better. You will then have the freedom to set your own goals and timeframe, until the day comes when you need the money.

Remember to set timeframes that are reasonable and to allocate budgets to your savings accounts that are feasible. An example could be deciding to set aside 10% of your monthly income, so that as your income grows, so will your savings.

  1. Figure out your net worth and cash flow

Next, in order to successfully secure your financial future, you need to understand what your net worth is. To do this, you need to add up your assets and your liabilities, and you need to subtract your liabilities from your net worth.

This is an important step because your net worth drives your financial planning process. While many think that wealthcare is just about increasing your assets, it is also about decreasing your liabilities over time. If your net worth is a positive figure, you are on the right track. If your net worth is in the red, it is time to tackle your debt to make it possible for you to grow your assets.

  1. Set aside an emergency fund

You should find some time to set aside an emergency fund. These are liquid assets that are easily accessible, and these vary in amount. Some people prefer to have three months of living expenses covered in their emergency fund, while others prefer to have extra security with six months of living expenses covered. It depends entirely on you what you think is suitable for you.

Emergency funds are used for ‘rainy days’. These are days when you become unemployed, or you cannot work and cannot gain access to paid leave. They are for urgent medical expenses, which is particularly important if you live in a country where health insurance is not covered or subsidised by your government.

You should always have an emergency fund before you start saving, as it will provide you with a safety net in case anything goes wrong in life. To calculate this fund, you should take your total net income for three to six months and subtract the amount you saved during this period. You can also track your living expenses – such as your rent, bills, groceries, payments, and other financial responsibilities – monthly, to make sure you get an accurate estimate of how much you will need to set aside for your fund.

  1. Invest with your assets

If you have enough liquid assets to spare after setting aside your emergency fund, then you can potentially invest the rest of your assets. You can do this in bonds, stocks, commodities, crypto, and more. But you should be aware of the risk that financial markets bring. Always be sensible and know your own risk appetite.

As investments go, this money will be tied up in the long term and you should be able to live without it for years. If you do not have the financial security for this, then you should not be investing.

  1. Keep track of your assets and investments

Finally, once you have set up your investments and set aside a good portion of money for emergency funds. You should make sure to keep track of your progress and how your wealth is accumulating. This is important, as you want to make sure your assets are continually appreciating instead of depreciating. When you notice something is awry, it is reasonable for you to intervene.

Many people opt for wealth management plans because they can enjoy the help of a professional when it comes to measuring their progress. Many financial advisors and planners can give you advice on when to switch up your investments, when to play it safe, and when to take a risk.


Wealth management is for everyone and having clarity around the language used is a necessity in building a solid financial future. You don’t need to be wealthy to develop a sound financial plan. With the right attitude, discipline, and expertise, you will be able to plan out your finances. You may even be surprised at how easily it all comes together and how rewarding it can be to have your finances in order.


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