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Active wealth management. Mystified? No problem. Just think of it as similar to your fire escape plan and you’re set. Here’s what you need to do.

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August 30, 2021 7 min read

This story originally appeared on MarketBeat

What’s an active wealth plan? 

An active wealth plan means that you take a proactive approach to five different areas in your financial life: investing, borrowing, spending, managing taxes, and protecting wealth.

Think of it like this. You have a plan for getting out of your house in the event of a fire, right? 

Hopefully, you have, and you’ve gone through the steps of being proactive, planning, executing, and monitoring, like so:

  • Proactive: You put smoke detectors in your home. 
  • Plan: You have a plan for what you’ll do if a fire occurs. “If there’s a fire on the second floor, we’ll go out the front door. If there’s a fire on the first floor, we’ll…” You get the picture.
  • Execute: You follow through with all plans (and implement them) when a fire does occur. And if the worst doesn’t happen (thank goodness), you still follow through with every other part of your plan.
  • Monitor: You check your smoke detectors periodically and remind your family members periodically about your family’s fire escape plan.

Now, let’s break down five areas of your financial life and how you can implement the same types of actions for each. 


Investing should always involve your goals. When will you need your money? What are you saving for? No matter what, you should always, always start there when you consider your investing plan. 

  • Proactive: You evaluate your goals. You think about the ways you’ll need money both in the short- and long-term timeframes. For example, do you want to send your child to college? Plan for retirement at 55? Being disciplined about those areas of your life and contributing accordingly can mean the difference between having enough for college and planning effectively for retirement. proactive investing behavior with some degree of reactive decisions can be beneficial to making investment decisions.
  • Plan: It’s true that sometimes, the best-laid plans get twisted around. You can’t control a job loss, medical issues or well, a fire in your home. However, planning your best life now and actively putting that plan into place — whether you choose a combination of stocks, bonds, tax-advantaged accounts, and/or real estate — will keep you further ahead than if you didn’t plan at all.
  • Execute: Once you have an investment plan, you put it into place. If you’re still stumped about how or where to invest your money, you get a financial professional to help you. 
  • Monitor: Check that return on investment (ROI)! An active wealth plan means you continue to monitor your funds. Make sure your investments will allow you to fully realize your goals. Stay fully invested throughout downturns. Stick to your investment plan even in the face of market downturns and regularly rebalance to fulfill your long-term targets. 


When you borrow money, you might not immediately consider that a part of your active wealth plan, but it’s a huge part of it. If you borrow money for a mortgage or a business, 

  • Proactive: Educate yourself. Understand all the rules of responsible borrowing. If you don’t understand the definition of an origination fee, find out. Understand the implications of borrowing for anything, from a home to a business. Make sure you can comfortably repay the money you borrow.
  • Plan: How will you borrow? From an online bank? Credit union? Traditional brick-and-mortar institution? Will you use borrowing as leverage? Borrowing allows you to spread funds around in different ways or through a variety of investment options. Plan how you’ll do it, and shop around for the right interest rates, the right entity (or even individual) to borrow from, and more.
  • Execute: Act on your plan, and make sure you have the financial resources, budget in place moving forward. Choose the right interest rates. Also, make sure you have a high credit score and be prepared to put up your home or other assets as collateral. 
  • Monitor: Monitor the amount you owe over time. If you’re having trouble making payments, figure out whether you can reduce or eliminate the amount you’re spending per month and let your lender know when you’re struggling to make your payments.


Is how you spend your money part of an active wealth plan? Of course! 

  • Proactive: Commit to not just letting your money slide away from you. It’s easy to spend without giving much thought to how much you’ll save and invest. Being proactive with your money means that you assign each dollar you earn a job.  
  • Plan: Calculate your monthly income, pick a budgeting method. Consider using the 50/30/20 rule: 50% of your income goes toward needs, 30% goes toward the things you want and 20% of your income goes toward savings and debt repayment.
  • Execute: Put your budget into place. 
  • Monitor: Finally, monitor your budget to find out whether it’s going well. This gives you an accurate picture of where your money goes. Keep your tracking consistent and change up the budget if needed.

Managing Taxes 

Managing taxes effectively helps you organize how you manage taxes in an active wealth plan. 

  • Proactive: Rather than waiting until April 1 to get serious about your taxes, you can implement some proactive strategies in managing your taxes. For example, you can review your accounting methods and make sure they work for you. You can also implement strategies like long-term tax bracket planning, maximizing 401(k) contributions, and even charitable contributions throughout the year.
  • Plan: Work with an accountant to help you plan, especially if you don’t have an interest in tax planning on your own. Start a filing and organizing system, understand tax deductions, keep track of your receipts and tax documents throughout the year — all of that will help. In addition, plan for the ways you can get deductions throughout the year and other tax benefits — your accountant will help you pinpoint these.
  • Execute: You follow through with all plans (and implement them) throughout the year, not just during tax season. Also pay estimated taxes throughout the year if you own your own business. 
  • Monitor: Navigate possible tax deductions, create tax strategies for the future, and if the IRS shows up to audit your taxes, enlist an accountant’s help.

Protecting Wealth

Finally, you protect your wealth, just like you would your family in an extreme situation, like a fire.

  • Proactive: Protecting your wealth, just like your home in case of a fire, doesn’t just happen passively. It’s too late to install smoke detectors if you already have a kitchen fire raging right now.  
  • Plan: Invite others to help protect your wealth if you don’t feel confident that you can do things like rebalance, diversify, figure out how to take advantage of tax perks and more. 
  • Execute: Follow through with everything just mentioned, and remember that owning a mix of different asset classes allocated toward the right time horizon and risk tolerance for your goals often gives you the best execution strategy possible. A diversified portfolio offers one of the best forms of protection.
  • Monitor: As you monitor your investments and plans, make sure you have an emergency fund and excellent homeowners and personal property insurance coverage. (This is also proactive!) 

Consider Inviting Others to Your Active Wealth Plan

Much like calling the fire department when your fireplace goes up in flames, you may want to encourage others to join you on the journey of protecting your wealth. Personal finance, while it does say “personal” in the title, doesn’t mean that you have to go it alone. However, just make sure you allocate time and energy toward all areas of an active wealth plan, not just one or two. 

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