“Someone who is building wealth knows that investing is just one part of a big picture.”

“Building wealth demands ruthless objectivity about your financial status and your financial habits.”

“Adopting a broad, integrated approach to personal and financial decision-making is essential to building wealth.”

Many people who buy and sell stocks, bonds and mutual funds think of themselves as investors. Though investing may greatly affect their net worth, it’s an activity that is separate from the rest of their professional and personal interests. They may watch the markets scrupulously, take the time and the effort to educate themselves in the basics, do ongoing research, and perhaps even beat the Dow over a period of time;but all of this is still just investing.

Investing is fundamentally different than building wealth, and the difference begins with attitude. Someone who is intent on building wealth knows that successful investing is only one part of a much bigger picture that includes such things as articulating your goals, evaluating your financial position right now, calculating your investment time horizon, determining your risk tolerance, and considering tax and estate planning. Let’s look at each of these.

The starting point is to carefully evaluate your own personal and professional goals. You are the expert in your lifestyle;even if you don’t know it! Often, we need someone’s help to articulate our values, dreams and goals. It takes time and effort to answer carefully such questions as “Where do I want to be living when I’m in my 50s or 60s, for example, in a small town, an exurb, or a resort area?” “How do I want to spend my time?” “What do I need to do now to make sure I can afford it?” These questions are critical because unless you know where you want to go, you won’t be able to build the wealth you need to get there.

The next step is to objectively look at your current financial status. What percentage of your income do you devote to a systematic savings and investment plan? What can you adjust in the budget to save more or are there higher return investments with suitable risk to help you achieve your goals? What tax shelters can you take advantage of now that are a good investment for your future?

The third step is to consider what your investment time horizon is. Suppose you’re now 50 years old, at or near the peak of your income earning potential and you anticipate another 12 to 15 years of high income. What are your investment options for that period of time? What demographic, technological and business trends will be driving the economy during that time and how do they affect your financial choices? Are there any critical economic junctures you should pay attention to?

The fourth step is to determine how much risk you are able to take. A competent financial advisor can help you understand this and he or she also can explain the potential risk of different investment choices. This is very important because it will determine how much of a downside correction you can withstand before you panic and sell. How will you react when your portfolio loses 20 percent? Or 40 percent? How about 50 or 60 percent? In the bull market we’ve been enjoying these are not questions that many people have had to consider seriously. But experts know that panic selling is the single biggest mistake an investor can mak e.

The fifth step is to consider the tax consequences of investing profitably. Your first goal is to defer taxes, since every dollar you don’t pay the government is a dollar you can invest for yourself. You should also consider the numerous investment products, such as variable annuities and variable universal life insurance policies, which will let you shift your assets without tax consequences. Finally there is the crucial subject of estate planning, which many of us simply don’t think about. How are you going to preserve the wealth you have so painstakingly built and pass it to the people and causes you most care about?

Above all, building wealth requires a broad, integrated approach to personal and financial decision-making. Since most of us lack the time and the expertise to develop this vision, I highly recommend finding an excellent financial advisor, one who is expert in managing clients like you.