For most people, steady, ongoing work is the foundation of their wealth. Career success and a good salary, or building and growing your own business, is the means to a lifestyle you enjoy now and the promise of a stable financial future.
For others, an inheritance, a windfall from an investment or employee stock, selling a business, or even winning the lottery is the source of wealth.
But no matter how high your salary, successful your business is, or big the windfall – is it enough to create lasting wealth? How about generational wealth?
If your goal is to have enough to live the life you want and pass down wealth to provide ongoing security for your family, what do you need to think about besides money?
Black swan events happen, markets go through extended downturns, and unexpected life or job issues can derail plans.
That’s where financial planning comes in. We break down some of the things you need to think about on the journey to lasting wealth.
Start by Creating Your Own Definition of Wealth
Rather than focusing on a number, try defining wealth as a lifestyle. This gets you closer to understanding what you need and when you need it. Once you start to understand what your goals are, you can build a financial plan that balances your lifestyle now with the goals you want to achieve in the future. For older generations, working and saving until retirement at age 65 was the norm. Younger generations may have different goals or may have multiple goals and want to achieve them sooner.
- Early retirement
- One spouse stops working
- Start a business
- Buy a second home
- Pay off all debt and be able to self-fund kids’ college
Make Informed Choices
The word that resonates most strongly with investors today is flexibility. Whatever the individual definition of wealth is, it often starts with a desire to have more control over time and work.
Understanding the trade-offs that are involved can help you make decisions that are right for you.
For example, if retiring early is the goal, a common approach is to sacrifice lifestyle and time in the short term in favor of reducing expenses, increasing saving, and maximizing income through work. There’s even a name for this – it’s called the FIRE movement. However, there’s a limit to how long you can make sacrifices and continue to feel satisfied by your life in the moment. Instead, there are several “levers” you can pull to create a better balance:
- Extend your retirement age
- Re-evaluate risk in your investments
- Reduce high-interest debt and shift to lower-interest debt
- Optimize tax efficiency
This is just one example, and there’s no one right answer. Being thoughtful about your goals, then exploring different scenarios, and taking into account potential benefits from the financial planning toolkit can put you on a path to maximize your own financial independence and flexibility.
Expand Your Options
The first step to lasting wealth is to invest as early and as consistently as possible. Ensuring that you are maxing out tax-advantaged retirement savings, and taking advantage of health savings accounts and 529 plans can put money to work and reduce your tax burden.
Expanding beyond the options available in retirement plans by putting after-tax dollars into a taxable account can help you diversify your portfolio. This allows you to refine your risk profile and potentially boost return.
Control Your Risk
Ensuring that you have lasting wealth means protecting it. A review of your insurance coverage that takes into account potential liability is critical. Depending on your lifestyle, you may want to explore an umbrella policy that provides additional coverage above the limits on your existing insurance policies.
Start Estate Planning Now
Ensuring that your wealth can provide for your family for decades to come is something you should do proactively. A good estate plan is both thoughtful and efficient. It ensures that your wishes are carried out, and it preserves as much of your estate as possible for your dependents, not the tax man. For many families, a trust can simplify the transfer of assets, keep your estate private, and can be customized in ways a will cannot. You also don’t have to relinquish control of your assets.
The Bottom Line
Achieving lasting wealth requires more than just asset growth. Understanding your goals, the trade-offs in terms of choices, and how you can incorporate financial planning tools into your situation can help you protect and grow your wealth for generations to come.
To schedule a call to review your financial plan and investments Click Here
SUBSCRIBE TO THE FINANCIAL INCLINE
This content not reviewed by FINRA
Incline Wealth Advisors, LLC, its owners, officers, directors, employees, subsidiaries, service providers, content providers and third-party affiliates (referred to as “IWA”) do not offer the sale of securities or other investments. None of the information provided is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering.
The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. IWA does not promise or guarantee any income or particular result from your use of the information contained herein. Under no circumstances will Incline Wealth Advisors, LLC be liable for any loss or damage caused by your reliance on the information contained herein.
It is your responsibility to evaluate any information, opinion, or other content contained. Please seek the advice of professionals regarding the evaluation of any specific content. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized. The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Incline Wealth Advisors, LLC(referred to as “IWA”) disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.
IWA does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall IWA be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if IWA or a IWA authorized representative has been advised of the possibility of such damages.
In no event shall Incline Wealth Advisors, LLC have any liability to you for damages, losses, and causes of action for accessing this site.