MONEY THOUGHTS: How to build holistic wealth with a budget

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AS our world grows more infectious, dangerous and tumultuous, how do we defend our loved ones from disease and scarcity? Good question.

With the growing complexity of Earth’s financial system, one huge benefit that we often miss is how those of us willing — and perhaps even eager — to invest the cerebral focus required to understand the basics of financial planning will fare better than those who do not.

As I have explained many times in this Money Thoughts column, a complete personal financial plan for an individual will encompass three dimensions of wealth: Wealth Protection, Wealth Accumulation and Wealth Distribution. I find it easiest to remember those three interlocking initiatives by harnessing the mnemonic PAD for Protection, Accumulation and Distribution.

I’ve learnt from more than 20 years of speaking professionally on financial planning and retirement planning that no one in my audiences has any trouble remembering the word Wealth. After all, what each of us covets is wealth in its broadest sense — holistic wellbeing.

This has never been truer for us as a species because in the midst of our raging pandemic all of us covet after health, yearn for safety, and — as always — pursue economic bounty.

All sensible well-balanced individuals recognise money is not the most important thing in life. There are many millionaires and billionaires who would trade sizeable fractions of their total net worth for healthy bodies, for the ability to sleep well at night, and for more time with their loved ones, just to pick three forms of wellbeing not directly linked to having oodles of cash.

Yet when we begin to drill down through the outer crust of those holistic goals we come face-to-face to with a stark realisation:

When we get serious enough about managing our money that we construct and then heed the dictates of a well-structured written budget, we quickly discover budgeting is a potent tool.


We can harness the power of our budget to manage our money better so we consistently spend less than we earn. Doing so will empower us to build monetary wealth that can be channelled to help us live fitter, healthier lives, perhaps enjoy more peace and less stress that translate to fewer bouts of insomnia, and even retire earlier or just work fewer days per week so we may spend greater periods of unbroken companionship with the people we love.

None of those holistic perks is a certainty but in a probabilistic world figuring out how to stack in our favour the deck of cards life deals us through the judicious application of some extra money is astute.

To be able to do all that, consider the wealth accumulation options available to us when we construct a viable budget to guide us through our (hopefully) long working lives.

First, we could use the money we save to start a business that catapults us to great wealth. That’s the dream; and for those who make it happen, congratulations! But note:

Globally nine out of 10 new business start-ups eventually fail. Therefore, it is wise for all of us — entrepreneurs or not — to use our monthly budget surpluses to save and invest wisely.

Therefore, second, we should use our excess wealth to save money to build liquidity as well as to pay down our debts. We need monetary liquidity in the form of cash to help stabilise our finances and our emotions. Also, we should pay off our debts to steadily move toward the ideal state of owing nothing to anyone.

And, third, we should use our budget surpluses to build up an investment portfolio that is well-diversified across asset classes, geographic regions and, ideally, a long timeline (using a strategy like dollar-cost averaging (DCA), for instance).

Your savings and investments in aggregate have two big goals: capital gains and passive income generation.


When I construct a new savings and investment portfolio for a financial planning client, I use three, four or five asset classes selected from:

1. Cash

2. Fixed income

3. Equities

4. Investment real estate

5. Alternative investments

Based on what I’ve outlined above, you’ll know the three overarching purposes of any integrated portfolio is to provide liquidity (L), accrue capital gains (CG), and generate passive income (PI).

Cash in our present low interest rate environment is not going to help us build much CG. However, it is perfect for providing us with L. Fixed income should be used more to generate PI than accumulate CG, but it is also capable of providing a second layer of L.

Equities and investment real estate are generally great at providing us with both CG (through price appreciation) and PI (via dividends and rental inflows, respectively).

Alternative investments can take many forms, including hedge funds (not readily available in Malaysia), private equity and foreign currencies. But my favourite segment in the alternative investments space is commodities, which are the “stuff of life” upon which our civilisation is built. For my clients, I use commodities for CG.

Next week we’ll take a closer look at the trade-off between CG and PI, and explore the easy-to-use Rule of 72 that helps us figure out how long we’ll need to double our money.

© 2021 Rajen Devadason

Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at; he may be connected with on LinkedIn at, or via You may also follow him on Twitter @Rajen Devadason and on Clubhouse (Rajen Devadason).

© New Straits Times Press (M) Bhd

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