Creating wealth is important if you want to secure your future and achieve financial independence. Wealth preservation is also as important. It is not enough to accumulate and grow your wealth. Investors should also ensure that the wealth that they have created will remain intact and can last their respective lifetimes or benefit their heirs.
Why Wealth Preservation is Important: The Reasons Why You Should Conserve or Preserve Your Wealth
Whether you are just starting out or have been building a financial portfolio for years, one of the most important things you can do as part of your overall financial goals and objectives is to conserve or protect your wealth through specific wealth preservation strategies.
Even if you have done everything right and saved money prudently and accumulated assets and other investments during your lifetime, there is always a chance that circumstances could take a turn for the worse. In other words, things can change in ways that might negate all of the good work you have done up until this point.
Why exactly do you need to preserve your wealth? What is the importance of wealth preservation? The following are the reasons why you should preserve your wealth:
1. Managing and Minimizing Risk: Uncertainties Can Wipe Out Your Wealth
Your money loses its value over time if you let it sleep in bank accounts due to inflation. Investing in other assets such as stocks, bonds, and real estate has risks that can affect their respective values or worth.
Furthermore, uncertainties that require out-of-pocket expenses can leave a dent in your savings. Some scenarios such as medical bills or vehicle accidents can force you to liquidate your assets. Circumstances such as disablement, serious illness, and loss of employment or livelihood can leave you without the ability to generate income.
Your wealth will not remain intact regardless of where you put it and you are at risk of utilizing it prematurely due to unfortunate incidents. You need to protect your wealth through a sound investment strategy and risk management via insurance.
2. Achieving Your Long-Term Goal: Enjoying Your Wealth in the Future
Some people would say that money cannot buy happiness. But the fact remains that money or wealth gives you more options in life. American naturalist and philosopher Henry David Thoreau once said that wealth is the ability to fully experience life.
Remember that you are building your wealth to achieve financial security in the future. Your specific financial goals and objectives might include preparing for your retirement by building your retirement fund, purchasing a new house, building another stream of income, or having enough funds to send your children to universities in the future.
The worst-case scenario is that you lose your wealth entirely, never having been able to enjoy the fruits of your labor in the first place. This scenario might force you to take on a lower standard of living when you retire, remain at your current occupation to pay for rent, struggle to make ends meet, or force your children to take on college loans.
Hence, one of the reasons why wealth preservation is important is that at some point in your life in the future, you have to enjoy the product of long years of earning, saving, and investing while maintaining or improving your current standard of living.
3. Wealth Transfer to Beneficiaries: Considering Your Wealth as Your Legacy
Of course, you cannot bring your wealth to the afterlife. It is useless to you once you pass on. However, your wealth is still your legacy. Building and preserving it means leaving a lasting legacy that can change the future of your beneficiaries.
Most individuals with family members dependent on their livelihood need to ensure that their loved ones will remain provided and financially secure in case of unfortunate incidents. Protecting your wealth is about enjoying it in the future and ensuring that it remains not only intact but also valuable once transferred to the next generation.
Billionaires such as Warren Buffet and Bill Gates have pledged to donate most of their wealth to philanthropic deeds once they passed on. They believe that they have an obligation to return what they have accumulated to societies in ways that can have positive impacts.