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The secret to growing wealth is being able to plan wisely. Familiarize yourself with these seven foundational principles to secure your long-term financial prosperity.

The organizational consultant and author Idowu Koyenikan coined a powerful quote on the art of value creation: “The money you make is a symbol of the value you create.” Creating said value and growing wealth ultimately boils down to your ability to plan.

This maxim is true of business – the fastest-growing companies typically offer the greatest value to their customers. It is also true of building wealth – the more value created from investments and spending, the faster wealth accumulates.

Get the fundamentals of wealth planning right and the world, as they say, is your oyster.

1. Strong Foundations

Every good structure is built upon strong foundations. The same is true for wealth. Regularly revisit your financial foundations to check for cracks or gaps, then make any necessary improvements to shore them up.

Ensure your business and investments are set up in the most suitable legal structures; your spending and investment plan reflects your current circumstances as well as goals; and your emergency fund has adequate reserves (ideally six months’ worth of income) to cover any unexpected setbacks.

2. Positive Relationships

One of biggest single hits to wealth are relationship breakdowns and divorces. Healthy communication, joint decision-making (especially about money), equal input into caregiving responsibilities and scheduled time for fun and intimacy (date nights!) are all important investments in maintaining a relationship that works for both partners.

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Meanwhile pre-nuptial (and even post-nuptial) agreements can provide legal safeguards over assets you brought into the relationship or want to retain within your family, such as inheritances.

3. Taxes in Check

Accountants don’t always ask about particular expenses you may have incurred, so if you don’t offer it up, it can be missed. Financial advice expenses are a common example of this, and they are generally deductible. Other dollars regularly left on the table include underclaimed depreciation, unclaimed mileage and overlooked deductions – especially small ones like work coffees and stationery, which don’t seem like much but quickly add up.

Also ensure your returns are up-to-date and lodged on time each year – outstanding refunds can be put to good use. Digital tools are useful for keeping track of expenses and taking the hassle out of lodgments.

4. Superannuation Contributions

Our 40s and 50s are typically peak-earning years: professional experience demands high pay, existing investments are delivering returns, adult kids begin leaving the nest and mortgages are getting paid down. This means more disposable cash can be directed into retirement savings.

There are numerous benefits to making voluntary contributions to superannuation and retirement funds, including tax concessions and lower income tax, as well as the growth those additional funds will earn between now and retirement. Use them or lose them.

Depending on your circumstances, it can be worth exploring personal and spousal contributions, catch-up provisions to cover lower income-earning years and downsizing contributions from the sale of the family home. Low-income earners may also be eligible for government co-contributions.

5. Right-size Insurances

A set-and-forget approach to insurances is a risky move. First, your needs change as you age and your household makeup changes. Failing to update insurances means the amount of coverage you have may decrease, you aren’t covered at all for new needs that have arisen or you’re overpaying by maintaining cover for things you no longer need.

Your income should increase over time too, which income protection cover should reflect. Also, the replacement costs for home, contents, vehicles and other physical assets – both personal and business – continue to rise. Those increases have been huge during years of high inflation. Inadequate coverage will leave you short, should you need to make a claim.

6. Estate Planning Essentials

Estate planning isn’t just about determining who gets what once you’re gone, but how you are cared for in the event of ill health. Among the estate planning matters to explore and keep updated are:

• Wills – yours and your partner’s
• Testamentary trusts
• Beneficiaries – nominated in super, trusts and other separate structures
• Power of attorney
• Advance health directive (a ‘living will’)
• Letter of wishes – outlining your funeral wishes and hopes for other non-financial arrangements

Having these plans in place ensures your wishes are known and implemented.

7. Self-care

You are a separate entity from your business, and you both need to be looked after. Sacrificing your health and wellbeing for the business, or because you’re time poor, doesn’t make financial sense. This will only lead to higher medical costs, poorer decision-making, lost earnings to sick leave, forced early retirement due to ill health or premature death. After all, the business has you and others looking after it, but who is looking after you?

The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organizations the owner may be associated with in a professional or personal capacity unless explicitly stated.

Helen Baker

Contributor Collective Member

Helen Baker is a licensed Australian financial advisor, an authorized representative of BPW Partners and the author of ‘On Your Own Two Feet: The Essential Guide to Financial Independence for all Women’. She is among the one percent of financial planners who hold a master’s degree in the field. Proceeds from Helen’s book sales are donated to charities supporting disadvantaged women and children. Find out more at https://onyourowntwofeet.com.au/

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