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AFO2023-05-15T05:01:55+00:00

A Beginner's Guide for Personal Wealth Management

Reviewed by:
Dan Casey
Dan Casey

Dan Casey

Vice President

Vice President, Financial Planner, and Portfolio Manager at Arrowroot Family Office. I manage clients’ investment portfolios and help them find solutions and optimal strategies for their financial needs. In addition to my passion for finance, I am an exercise physiologist with over a decade’s experience.

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A Beginner's Guide for Personal Wealth Management
A Beginner's Guide for Personal Wealth Management

Personal wealth management can feel like a challenging, never-ending, and daunting task that requires a degree in finance to undertake; however, creating a financially secure future is possible for every individual and family to generate.

To start, one must figure out where they are today in their personal financial journey and how to achieve their financial goals, whether that may be financial freedom and stability or a specific monetary goal for retirement. In order to achieve these goals, it is then vital to create reasonable strategies that can make these goals achievable without veering into costly detours. Some goals often take years or even decades to achieve; however, with a well-thought-out strategy and plan, lofty goals that seem almost unreachable can become a reality with hard work and determination.

By taking action to proactively plan one’s future, individuals and families save lots of time and money to fix monetary shortcomings in later years, especially closer to retirement. Below is a guide to personal wealth management that can help families and individuals alike gain control over their personal finances, achieve financial freedom and stability, and plan for a comfortable retirement.

Table of Contents hide
  1. Set short-term and long-term goals
  2. Creating a budget
  3. Building an emergency fund
  4. Pay off monthly credit card debt in full
  5. Save for retirement
  6. Borrow smart
  7. FAQs

Set short-term and long-term goals

Building financial security and stability is an ongoing task that never ends. Unexpected financial burdens and occurrences do come up, many are predictable, but some are unforeseen. When planning for the future, it is essential to consider these unexpected and unpredictable circumstances that may often come up and how they affect the short-term and long-term goals that one may have set for themselves individually or for their family. Some financial goals, like setting aside funds for a yearly vacation fund, are very short-term, while longer goals like retirement planning can take decades to reach.

Creating a master list of all one’s goals, short and long, can make it easier to keep track of the goals that have already been completed for the year or the goals that are in the process of being worked on. This will allow one to plan the next course of action and see which goals are lacking progression.

An example of a short-term goal is to create an emergency fund that can cover at least three months of living expenses in the event that you or your spouse were to lose their job, while a long-term goal can be to save at least 10% of yearly gross salary every year for retirement, for a down payment on a property, or for the education of a child.

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Creating a budget

Budgets are an integral part of personal finance that allows individuals and families to achieve their monetary goals. The purpose of a budget is to lay out all living expenses and other miscellaneous expenses on a spreadsheet to decide how much monthly income to allocate to each category. Categories include essential living expenses such as rent/mortgage, food, car payments, non-essential living expenses such as entertainment and dining out, and lastly, monthly savings and investment.

A popular framework often recommended by financial planners and advisers is the 50/30/20 budgeting framework. This allocated 50% to essential costs, 30% to non-essential costs, and 20% to savings costs.

When everything is allocated in this manner, it is easier for individuals and families to see where they may be overspending or underspending on specific categories. Finding ways to cut down on certain categories and save more money for retirement or other financial goals is imperative when constructing or adjusting a budget. This allows them to adjust their personal finances, fix budgeting miscalculations, and better plan for their financial future.

Building an emergency fund

Emergency funds are essential for the financial stability and health of a family or individual. Unexpected inconveniences can happen at any time, and it is important to be prepared and plan for those difficulties to happen. Financial curveballs, such as layoffs, car repairs, or medical expenses, can be expensive and can come out of nowhere. Having a financial cushion can give families and individuals the peace of mind of knowing that they are prepared and ready if a financial emergency were to happen.

Financial planners and advisers recommend having at least three months of living expenses saved in an emergency account at the minimum; however, having at least six months of living expenses saved in an account would be even better to make sure that one is completely prepared for any circumstance.

While this emergency fund metric can seem lofty for a family or individual to achieve, using certain strategies, such as creating separate emergency savings account with high yields that are independent of other personal savings accounts or creating an automated system to siphon funds into that account, can give families and individuals piece of mind and make the processes automatic and independent from other savings vehicles.

Pay off monthly credit card debt in full

Credit cards are notorious for charging high-interest rates on unpaid credit card balances. With an average interest rate of 17% on unpaid credit, it is vital to keep control of one’s credit card balance and never miss a monthly payment.

Credit cards often give consumers the option to pay back a minimal balance. While that balance can be cheaper in the short term, consumers often pay back more money in the long term. It is recommended to always pay back one’s credit card balance in full each month and to only spend that one can afford. Credit cards can often provide great benefits to the consumer and are great for building credit to qualify for home/car loans.

Save for retirement

It is never too early to begin saving for retirement; the longer one is to wait, the less time someone has to let compound interest do its magic. With interest compounding every year, the earlier one starts, the more money one is to have when they are ready to retire. By age 35, financial planners and advisers recommend that individuals have two times their yearly salary saved and invested for retirement, and by age 50, one should have six times their yearly salary in their retirement account. By age 60, when individuals begin to consider retirement, one should have ten times their salary or more saved for retirement.

Hence, financial planners and advisers recommend saving at least 10% of their gross income for retirement with one’s first job. Waiting to invest and save for retirement till later on in one’s career can have drastic negative impacts. If one were to wait until their 30s or 40s before beginning their retirement investments, one would need to save 20% or more of their salary to have a chance to catch up to the potential gains they could have made earlier in their career.

The reason for such a large retirement fund can be traced to a large inflation rate. Over the span of multiple decades, the value that a dollar has decreases over time, meaning one’s money would have less value over time. With financial planners and advisers recommending a yearly retirement salary equivalent to 80% of one’s yearly employment salary in retirement, funding multiple decades of an individual’s or a couple’s life could take hundreds of thousands of dollars, if not a million, in order to help fund and lead a comfortable life.

Another factor, diversification, is essential for retirement. Diversifying the investments in one’s retirement account is crucial in order to optimize one’s portfolio and minimize risk in accordance with the individual’s or family’s risk appetite. The more assets in one’s retirement portfolio, the less risk is present if one asset were to lose a large percentage of its value. Assets classes like stocks have a higher return but also a higher risk, while bonds have very low risk and very low return. Real estate is also another great option as an alternative investment asset class to sustain further diversification in one’s portfolio. In either case, having funds separated among various asset classes is essential in order to have a diverse portfolio with the least amount of risk for the return on investment.

In order to accumulate the money needed to retire, one could take advantage of many special retirement accounts that provided individuals with valuable tax breaks not found in regular investment accounts. Many employers offer retirement accounts that individuals are able to contribute to, such as 401k and 403b plans, the former by private workplace employers and the latter by government and nonprofit organizations. Employers often offer a matching policy that matches a certain percentage of your contributions. With company money getting placed directly into your retirement account for free, it is imperative to attempt to maximize one’s 401k or 403b each year in order to receive the full benefits of this policy.

Individuals are also able to contribute to IRA accounts or individual retirement accounts regardless of their employment. All listed accounts have “Traditional” and “Roth” account options that have different rules regarding taxation. With traditional accounts, one gets a tax break upfront, meaning that taxes are paid upon withdrawal in retirement. This type of account is valuable for employees with higher incomes compared to their retirement income. With Roth accounts, the tax break is delivered in retirement, meaning that tax is owed upfront, and no tax is paid once an individual reaches retirement. This is beneficial for students or entry-level workers who earn a lower income now than they would in retirement.

Borrow smart

Many big-ticket purchases, like vehicles, education, and properties, often involve taking out a standard loan. Making sure to only borrow money when it is truly needed is essential. Focusing on needs rather than wants is crucial in order to not irresponsibly overspend on one’s budget and detour from retirement savings plans. Focusing on borrowing from the correct lenders who offer lower interest rates is important in order to not spend unnecessary funding on interest repayment. In most cases, borrowing as little as possible will help individuals achieve their financial goals in the most optimal manner. Staying within one’s means by not purchasing the most expensive homes and vehicles and staying within one’s budget and price range in order to take out the least amount of loans is critical to stay out of debt and leave oneself more money to invest in their future.

FAQs

What is the 50/30/20 budget rule?
The 50/30/20 rule is a common percentage-based budget recommended by most financial planners and advisors. The budget is divided into three categories, 50% on essential needs, 30% on non-essential wants, and 20% on savings and investments.
What is the number 1 rule in personal finance?
The number 1 rule is to put monthly income into a monthly savings account first before allocating the remaining funds to other spending accounts. Before buying essential and non-essential items, it is important to set up an automated process to allocate funds to a savings account in order to build one’s savings for retirement.
What is the most important bill to pay?
Bills that cover necessities and needs are the most important bills to pay. Essential resources like shelter, water, heat, and food are items that are needed for survival for all individuals.
How much money should you have leftover after bills?
It is recommended to have at least 20 percent of one’s income left over after paying necessary and essential bills. Saving at least 20 percent of one’s income will allow for individuals and families to save for a comfortable retirement. Taking advantage of employer-sponsored 401(k) contribution matching policies is an excellent way to maximize one’s investments.
How much cash is too much in savings?
Due to inflation, liquid cash loses its value and purchasing power In the long run. Ideally, individuals and families should keep as little cash as possible in their spending accounts, only enough for comfortable living expenses and emergency fund accounts. Individuals should not have an excess of cash exceeding the $250,000 limit set by the Federal Deposit Insurance Corporation (FDIC) because that is the limit amount that is insured in the case of bankruptcy; however, this should not be a concern for the average individual.
What are personal finances?

Personal finance is defined as all the financial decisions and activities of an individual or household. This includes budgeting, insurance, tax planning, savings, estate planning, mortgage planning, and retirement planning.

References
  1. https://thefinancetwins.com/personalfinance101/
  2. https://www.moneyhelper.org.uk/en/everyday-money/budgeting/beginners-guide-to-managing-your-money
  3. https://www.refinery29.com/en-gb/how-to-manage-your-money
  4. https://www.kubera.com/blog/how-to-manage-your-wealth
  5. https://blog.usalliance.org/beginners-guide-to-wealth-management
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  • 4553 Glencoe Ave, Suite 200, Marina del Rey, CA 90292
    (833) 224-2249
  • 2 Boars Head Ln, Suite 110, Charlottesville, VA 22903
    (626) 712-2090
  • 1107 Investment Blvd, Suite 160 El Dorado Hills, CA 95762
    (916) 384-0050
  • 725 Barclay Circle, Suite 215, Rochester Hills, MI 48307
    (248) 453-5252
  • 950 Broadway, Suite M100, Tacoma WA 98402
    (253) 858-2427
  • Investment Management
  • 529 Plan
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Arrowroot Family Office LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that AFO has attained a certain level of skill or ability. Content should not be construed as legal or tax advice, AFO is not engaged in the practice of law or accounting.


AFO Form ADV (Part 2A & Part 2B)

AFO – ADV Part 3 Form CRS

    Terms & Condition | Privacy Policy | Web Accessibility

Copyright © 2025 Arrowroot Family Office – All rights reserved.

  • 4553 Glencoe Ave, Suite 200, Marina del Rey, CA 90292
    (833) 224-2249
  • 2 Boars Head Ln, Suite 110, Charlottesville, VA 22903
    (626) 712-2090
  • 1107 Investment Blvd, Suite 160 El Dorado Hills, CA 95762
    (916) 384-0050
  • 725 Barclay Circle, Suite 215, Rochester Hills, MI 48307
    (248) 453-5252
  • 950 Broadway, Suite M100, Tacoma WA 98402
    (253) 858-2427

Services

  • Investment Management
  • 529 Plan
  • IRA
  • 403(b)
  • 401(k)
  • Corporate retirement
  • Retirement Planning
  • Tax Planning
  • Estate Planning
  • Financial Planning

Calculators

  • Traditional IRA Calculator
  • Roth IRA Calculator

Links

  • M&A
  • Arrowroot Capital
  • Join Arrowroot
  • CPA Partnership
  • Press Releases
  • Careers
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  • Blogs
  • Clients Login

Newsletter

Arrowroot Family Office LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that AFO has attained a certain level of skill or ability. Content should not be construed as legal or tax advice, AFO is not engaged in the practice of law or accounting.

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