How you view money changes how you use money. And how you use your money changes the amount of money you end up owning. In this article, I’m going to discuss the three most common financial management strategies that almost everyone on the planet adheres to.
“Financial management” and “wealth management” are often catch-phrases used to discuss the handling only of fortunes, or collective pools of millions or even billions of dollars. This isn’t necessarily always true — money is money, and everyone has a “financial management” strategy, even the poorest of the poor.
If you make any of your own financial decisions, then you are your own financial manager and should read this guide just so you can see the possible alternatives to your current financial strategy.
The 3 Financial Management Strategies
The three general financial management strategies are simple. Some people focus on being frugal, some people focus on slowly investing, and others actually build wealth. To summarize:
- Personal Finance. Budgeting, frugality, saving money.
- Financial Planning. Long-term budgeting, monthly investing, retirement focused.
- Wealth Management. Build wealth as fast as possible.
Now, it has to be said that these three general financial strategies are not at all mutually exclusive – in other words, it’s possible that one is both being frugal, investing for retirement, and building wealth through other means as well.
When it comes to money, there are three basic mentality camps that consumers typically join. There’s the:
The Personal Finance Strategy
Most personal finance blogs focus on frugality, budgeting, and “making do” with less. Most personal finance books encourage scrimping, saving, giving up what you want, settling for less, and finding contentment in non-material things.
This is all very good, of course — nothing wrong with trying to save money and live on a budget.
But, almost inherently, if the only thing you try to do is save money, your income is almost always going to stay generally the same. This means your daily struggle will eventually become your life struggle, and even a few decades from now, you’ll be trying to scrimp and save and make ends meet. Nothing wrong with it, but it’s obviously not ideal.
Some people, including most financial advisors, have noticed the flaw here, and in the 50s, they created a new personal financial strategy called “financial planning.” Read below to learn more about this strategy.
The Financial Planning Strategy
Because frugality alone is no way to manage one’s money, of course. About 50 years ago, people started realizing that it would be best if they could become successful enough at some point that they could stop working and retire. Financial planning has effectually become the same concept as retirement planning with a few goodies added on for along the way.
This strategy is extremely traditional, and works for a lot of people. The only people that won’t really see it work well for them are those who have low-paying jobs and would like to live well in the here-and-now. They’re out of luck with the traditional financial planning wealth-management strategy.
Wealth Management Camp
This is where it gets interesting. The capitalist class — those who spend their time working on just managing their fortunes — use the wealth management strategy.
The wealth management strategy is essentially the philosophy that wealth is something you can manage, like a machine, car, or a business. It’s not just something someone gives you — it’s something you can make for yourself.
- This means you can build your own business and become fairly self-sufficient — no need to work for others.
- This means you can invest your income wisely — wisely enough to live off the returns and achieve financial independence.
- This means that you can start focusing on your financial situation, and stop focusing on catering to a boss, to a company, or to anyone else.
I’ll be writing more about the capitalist philosophy. If you’re interested in learning what this capitalist philosophy is, just subscribe below and I’ll send you updates automatically. It will, like everything on this site, be based on contrarian investing tactics, so if you prefer traditional approaches, this entire website might not be for you.
Wealth Management 101
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Financial Strategies, Philosophy and Mindset, Wealth Management 101