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Before money becomes wealth, it’s just money. For money to become wealth, it must be managed. Absent a clearly defined money management plan and the discipline to manage it based on proven principles, money is merely an instrument used in the “pursuit of more,” with no real destination and no opportunity for self-fulfillment. For people of wealth, having and spending more money doesn’t necessarily improve their happiness. Their fulfillment comes from having an income they can’t outlive while fulfilling their life ambitions and providing a meaningful legacy to those they love.

Money management incorporates the key financial disciplines for developing wealth accumulation, protection, and preservation strategies specific to your needs, objectives, values, priorities and risk tolerance. Equally important, money management focuses on the behavioral influences on your decision-making that can adversely impact the outcomes of long-term strategies. In fact, in our individual pursuits of wealth, each of us is waging a battle against powerful elements (i.e. taxes, inflation, market volatility, risks, debt) that have the potential to take away that which we’ve worked hard to attain. And, any indecision or inaction will virtually ensure our defeat.

The core elements of  money management include:

Establishing Clear Goals

Under a comprehensive money management approach to building wealth, you can have more clarity and conviction in your decisions knowing which are the ones will get you closer to your destination. It starts by establishing clearly defined goals. Having a clear vision of what you want to achieve and a time horizon for achieving it is essential.

Having clear goals helps you to track where you are. Very often, when people can’t see how they are progressing towards their goals, they give up. When you break your goals down into shorter-term milestones, it’s easier to see your progress and gain encouragement.

Finally, having clear and quantifiable goals can give you more clarity and conviction in your decision-making. If a certain choice won’t get you to your destination, don’t take it. Suddenly, your choices are clear and your decisions are driven by purpose. To see if you’re on track with your goals, check out the investment goal calculator.

Controlling Your Cash Flow

It’s impossible to accumulate wealth if you spend more money than you earn. Even if you don’t, you really can’t know if you will be financially successful if you don’t track where your money is going. Having a spending plan and the discipline to follow it, may seem elementary, but it has been central to the success of some of the wealthiest people in the world. If you were a business, your objective would be to find ways to increase your profits every month, which could then be invested for growth. With a sound money management plan, you would know how to prioritize your spending and make decisions based on whether they will get you closer to your goals.

Having a Long-Term Investment Strategy

Studies have shown that investors who adhere to a sound long-term investment strategy can achieve positive long-term returns. In part, that’s because when investors have confidence in their strategy, they avoid falling into behavioral traps, such as following the herd in trying to time the markets or chasing performance. In addition, having a sound long-term investment strategy as a part of a comprehensive money management plan helps investors keep their focus on their personal benchmarks rather than meaningless market benchmarks or indexes, enabling them to ignore short-term market events.

Use our helpful investment returns calculator to get an idea of what to expect from your investments.

Managing Portfolio Risk

Most investing mistakes are due to mismanaging risk. Investors who misunderstand, underestimate, overestimate, or miscalculate risk are prone to under performance. Achieving positive long-term returns requires proactive risk management along with a clear understanding of the risk-return relationship. It is actually the deliberate assumption of risk when applied to a properly allocated portfolio that drives return performance. To a great extent, it is through the management of risk, not the management of investments, that optimum portfolio construction takes place and superior long-term returns are achieved.

Disciplined investors accept the fact that there is risk in the markets and the chance of experiencing negative returns in their portfolio at one time or another is a very real likelihood. They know that the longer they hold their portfolio, the more likely they are to experience extended periods of negative returns. But they also know that the longer they hold their portfolio, and it is properly diversified with all risk factors considered, the greater the likelihood that their compounded annual return will be positive.

Being Tax Efficient

While it is our responsibility to pay taxes, we are under no obligation to pay more than is absolutely necessary. Yet, most people are unaware of how much in taxes they pay or the impact of unnecessary taxes on their ability to accumulate wealth. Money management shifts the focus away from what you make to what you keep after taxes. That’s where it becomes important to consider the tax characteristics of the investment you own and where they reside in your overall portfolio.

First, you consider “account location” – how to allocate your money among different types of accounts based on their respective tax treatment. Then you consider “asset location” – how to allocate different types of investments among the different types of accounts based on the tax treatment of the investments and the tax treatment of the different accounts. For example, you might consider allocating your least tax-efficient assets (i.e. taxable bonds) to a tax-deferred account, such as an IRA or 401(k). More tax-efficient investments (i.e. low-turnover funds, stocks held long-term) could be held in a taxable account.

Not only will this enable you to accumulate wealth faster, but it also gives you more options for distributing income more tax-efficiently in retirement.

Managing Your Risks

As you accumulate wealth you also increase your risk exposures in several areas of your life, and all you need is one to jeopardize all or a part of what you’ve worked so hard to create for you and your family. As much as we would like to think that wealth can make life easier, the difficult and oft-ignored reality is that it can actually make life more complicated – houses get bigger, cars more expensive, toys more plentiful, identities more visible, and lifestyles more lavish. The bottom line is with wealth there is a commensurate amount of financial exposure with the potential to take it all away.

Your money management plan should include a risk management assessment of your financial exposures along with protection strategies to prepare for the unexpected, including

  • The loss of income due to an extended illness or accident resulting in a long-term disability
  • The loss of a breadwinner to premature death
  • Catastrophic losses resulting from major property damage or medical costs
  • The exposure of assets to liability claims
  • The financial exposure of employing domestic staff
  • The financial perils of identity theft and fraud
  • The potential interruption or loss of a business due to any of the above

Money management provides you with a 360-degree view of your financial picture while applying key financial disciplines to help you overcome the obstacles to wealth. With a clear purpose for your money and sound money management principles behind it, you are in much more control of your financial destiny.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at

Please Note: DWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to DWM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Remember: If you are a DWM client, please contact DWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.

Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

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Jordan Dechtman

A financial services professional for over three decades, Jordan Dechtman’s mission is to help clients live better with more opportunities for fun and family time. Ideally, his goal is to help them achieve their dreams. Jordan brings a unique set of skills and experiences to the industry. His work ethic and drive to improve both himself and those around him have been honed during his 30+ years as a high net-worth private wealth advisor. Jordan holds a BS in Finance from the University of Arizona. Through his memberships in both the Financial Planning Association and the Financial Services Institute, he is dedicated to championing the financial planning process. Based on assets under management, Jordan has consistently been recognized by Securities America as being among the top 1% of over 1900 registered representatives.