Let me set the scene, I was at a bar with a few friends on a Sunday afternoon after a cracking 4-0 victory in the weekly football win, and being a gent, I bought the first round of the celebratory drinks when a comment came over my shoulder about the number of cards I have (whether it was debit or credit cards).
I have 2 credit cards, and 3 debit accounts, 2 ISA’s and a stock broking account with another bank (There are plausible reasons as to why Credit Cards and Loans work wonders for certain people, and again why they should be avoided but thats another story)
This is the point I make about wealth management. It is not just how much money you have in your stocks and shares ISA. Its the combination of all your wealth and the cumulation of all your debts.
I look month on month at my personal wealth, totalling the savings, the ISA’s, the credit debt, the bank loans, etc and see it from a holistic point of view. Its really the best way to look at whether you are growing or reaching your wealth. Even during the drop in the markets, my wealth has grown month on month. That is because my exposure in the market means even on a bad month ill still grow my savings, or reduce my debt rather than invest.
This can bring up some surprising results. I looked at my December wealth, and again in January (after a very expensive month for me!) and was surprised to see my wealth grow. I thought about this in a holistic way, my wealth grew because I paid off my credit card, made an over payment on a loan, and had some ad-hoc costs. Yes the ad-hoc costs did not do anything for my wealth, but the other two did. I thought it was a terrible month when it came to saving but in reality, the credit payment and the overpayment on a loan worked wonders for my overall Wealth Management.
Paying off debt should be seen as a very good thing, even though it does not feel like it when you see the money come out our account. In reality its easy to forget that you owe X amount. Each payment you make reduces that and shouldn’t be seen as a waste. In reality you are improving your overall wealth.
In many cases it is best to pay debt rather than take invest, yes its not making you money, but in reality, its improving your wealth…especially during volatile times.
A simple concept but it is easily missed if you do not see the bigger picture.
This should be your end goal, increase your wealth month on month.
Save first and spend whats left!