Evelyn Jacks: Poverty and Real Wealth Management: It Begins with Tax Literacy

Can the principles of Real Wealth Management™ apply to family units affected by the dark cycles of poverty, or a profound lack of trust in the family?  This is a question I was recently asked and happy to respond: yes.

Real Wealth Management is the strategic framework for a multi-stakeholder approach to joint financial decision-making in the areas of tax, investment, retirement, succession and business planning. It is taught exclusively by Knowledge Bureau.

This framework has developed over decades of collaboration with both tax and financial advisors, but also as a result of speaking to and working with millions of Canadians who struggle with their tax and financial literacy.

It provides a strategic process for financial empowerment that can apply to any household  on a consistent, measurable basis, without discrimination or judgement. It works because financial illiteracy is a common challenge across all socio-economic boundaries.     

Real Wealth Management is not just about money; it begins with financial behavior – how individuals and families can move from a “present orientation" to a “future orientation” in managing their finances. When this happens, families can start to work towards the goal of building Real Wealth. 

Real Wealth Management begins with an understanding of the 4 stages of the Use of Money:

Stage 1 - Non-discretionary (planning for food, clothing and shelter),

Stage 2 - Discretionary (planning resources to ensure food, clothing, shelter for the future),

Stage 3 - Use of Capital (planning for the use of financial capital to manage risk) and

Stage 4 -Sustainable Net Worth (planning for assets to exceed liabilities, and maintain their income-producing value)

Most families – whether of wealth or poverty – never move beyond Stage 1 or 2 because of circumstance or choices. 

To get to the desirable Stage 3 and 4 in the Uses of Money, individuals and families must be able to accumulate, grow, preserve and transition capital. 

This takes tax efficiency: maximizing refundable and non-refundable tax credits, minimizing tax withholdings from income sources and using tax efficient investments like the TFSA or RRSP as starting blocks in building wealth.  

Whether trapped in a cycle of poverty or a high net worth family in need of financial governance, those who can execute on Real Wealth Management principles for their clients bring them closer to the utopian state sustainable financial security. Tax literacy is a big part of this. 

It’s Your Money. Your Life. Human capital can be fragile. When people have capital, they can manage the future risk of losing jobs or health. Ask your tax professional about helping you manage economic risk by preparing the best return for your family unit and equipping you with a Real Wealth Management strategy to invest your family refunds.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition is now available. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.