Building wealth...and understanding what you're truly worth in the new economy.

Whether you choose to be wealthy or not is completely up to you - but all of us require a certain level of wealth to live. Food, shelter, education, giving to charity and providing for the family...this is the basic expenditure each of us will face during the course of our lives. If you want to live a different lifestyle, assuming the basics are the minimum you will require more wealth - by this I include additional education costs, asset costs (houses, cars), additional health costs etc. So we all know a ballpark figure how much wealth we might like to have...the difficulty is calculating exactly what you will need and then knowing what it will take to achieve it.

The danger around wealth is the concept of having 'too little or too much'. This is pretty much a rule of thumb based on what we think we need, what life costs, what others around us tell us and what we hear on the media. Even going to financial planners (note that I do not consider all planners to be experts) doesn't help that much in this regard because again the use heuristics (fancy word for 'rule of thumb') to assess Rate of Return on assets, life expectancy, inflation etc etc. So I would advise everyone to take a hard, long look at what they think they'll need for the future and calcuate a number in detail.

However one of the biggest disconnects I see around wealth management is knowing how to achieve the wealth number you have calculated in the step above. There are many ways to make money - own business, working for a corporation, investing but there are no guarantees in any business venture, return on investment or career earnings. One of the problems created is that the wealth target is not going to be obtained because the initial calculation was incorrect and the earnings estimate is also not correct. Which gets me to the main point I wish to make - you need to carefully assess your 'economic value' and what that means in respect to potential revenue to be earned. I want to focus initially on those who career is within a corporation, where a role title and framework of responsibility is quite often the basis for an earnings estimate. No one looks at their own individual skills, the ability to undertake a role effectively, how useful that role is to the company's future and bottom line. We assume so much and validate so little around what our abilities are truly worth - and the impact on your overall wealth is potentially immense.

We will see fallout from what I have spoken of above from the recent financial market events - many people will find their once high-paying jobs not existent and come to realize that their current skills are no longer relevant for the transformed financial or economic environment. For some this will impact their medium and long wealth assumptions and situation. My hope is that the wealth management industry and individuals in the future challenges some of the current financial heuristics in effect but pay closer attention to the forever changing economic value of one's skills and knowledge - and what that has in the wealth creation process