Don’t Let Your Wealth Slip Away: Tips for Making Your Money Work for You
By Jeff Gilbert
As a high-net-worth individual, you have likely worked hard to accumulate your wealth. But that doesn’t mean you shouldn’t make smarter financial moves to maximize the wealth you have already built. At Balboa Wealth Partners, our mission is to be your guide to financial independence. That’s why we’ve put together this list of our top 10 tips for making your money work for you—not the other way around.
Develop a Comprehensive Financial Plan
The first step is to set clear financial goals and develop a comprehensive financial plan. After all, you can’t make your money work for you if you don’t know where you want to go! Make sure your goals are specific, measurable, and realistic. Common financial goals include saving for a down payment on a house or vacation home, building up an inheritance for children or grandchildren, and achieving your ideal retirement lifestyle. Once you have a clear goal in mind, you can create a plan to get there and manage your money in ways that will work toward your ultimate goal.
Diversify Your Investments
High net-worth individuals have a wide range of investment options available to them. To maximize your wealth and make your money work for you, consider diversifying your portfolio and exploring a range of investment vehicles. Diversification is key to managing risk and realizing long-term growth. Spread your investments across a range of asset classes, including stocks, bonds, real estate, and alternative investments. Within each asset class, consider investing in a variety of sectors and industries to further diversify your portfolio.
Working with a financial advisor who understands your goals and risk tolerance can be a great way to develop a customized investment strategy that aligns with your financial objectives and takes into account your unique situation. By diversifying your portfolio and exploring a range of investment options, you can maximize your wealth and make your money work for you.
Avoid or Pay Off High-Interest Debt
Put simply, revolving high-interest debt is the archenemy of making your money work for you. It is the villain in your story, and it should be avoided as much as possible. If you have high-interest debt, such as credit card debt, paying it off should be your top priority. If left to accumulate, it can be incredibly challenging to make progress toward your financial goals, even for high-earners. Consider consolidating your debt or using the snowball or avalanche method to pay it off systematically.
Automate Your Finances
Automating your finances can be a powerful tool. Setting up automatic transfers from your checking account to your savings or retirement accounts allows you to consistently save and invest without even having to think about it. You can also automate bills to ensure you never miss a payment and avoid late fees. Automating your finances not only saves you time and effort but also helps you stay on track toward your financial goals. Just be sure to monitor your accounts regularly to keep everything running smoothly.
Utilize a Rewards Card & Pay it Off Each Month
This tip can be a great way to make your money work for you, but it should be used with caution and not as a way to live beyond your means. Many credit cards offer cash back, points, or miles for every dollar you spend, which can add up to significant rewards over time. Using these cards for everyday expenses you have to pay regardless can be a powerful way to make your money stretch further.
It’s crucial to use this strategy responsibly and pay off the balance in full each month to avoid interest charges and debt. By paying off your balance each month, you can enjoy the benefits of a rewards credit card without incurring any additional costs. Compare different cards and their rewards programs to find one that fits your spending habits and financial goals.
Open a High-Yield Savings Account
One of the easiest ways to put your money to work is by putting it into a high-yield savings account. These accounts offer competitive interest rates and allow you to earn more on your liquid cash assets (like an emergency fund) without subjecting them to the volatility of the stock market. Start by comparing different banks and their interest rates, fees, and other features to find a high-yield savings account that suits your needs. While the interest earned on a savings account may not be as high as other investment options, it provides a low-risk way to earn passive income on your savings.
For high-net-worth individuals looking to earn more on their idle cash, there are other options that can improve your interest rate while still keeping your funds relatively safe. These include money market accounts, certificates of deposit, and short-term Treasury bills. No matter which option you choose, putting your idle cash to work is a great strategy for maximizing your wealth.
Take Advantage of Employer Matching Contributions
If your employer offers a retirement savings plan, such as a 401(k) or 403(b), don’t neglect to take advantage of any matching contributions. Employer matching contributions are essentially free money that can significantly boost your retirement savings.
For example, your employer may offer a 50% match on the first 6% you contribute. If you earn $100,000 and contribute the full 6%, your employer will contribute an additional $3,000 to your retirement account. That’s an extra $3,000 toward your retirement that you didn’t have to earn or invest on your own! Be sure to contribute enough to your retirement account to maximize any employer-matching contributions, as it can make a big difference in the long run.
Giving back to your community and supporting causes you believe in is an important way to use your wealth to make a positive impact on the world. It’s also a great way to make your money work for you through proactive tax planning. There are many ways you can give back, such as:
- Establishing a charitable foundation: Setting up a charitable foundation can have significant tax benefits for high-net-worth individuals. Contributions to the foundation are tax-deductible and grow tax-free. Charitable foundations can also be used as an effective estate planning tool.
- Donating to organizations: You can donate to a range of organizations that align with your values and mission. One popular way to do this is through a donor-advised fund (DAF). With a DAF, you can make a tax-deductible contribution to a fund, then recommend grants to your favorite charities over time. This allows you to receive an immediate tax benefit while still having flexibility and control over how your charitable dollars are distributed.
- Qualified charitable distributions (QCDs): If you are over 70½ and have an individual retirement account (IRA), you can make QCDs directly to a charity of your choice. This allows you to satisfy your required minimum distributions while also making a charitable contribution that is excluded from your taxable income.
Invest in Real Estate
Investing in real estate is another way high-net-worth individuals can make the most of their wealth. Real estate investing can take many forms, such as buying and renting out a property, flipping houses, or investing in real estate investment trusts (REITs). Real estate can provide a passive way to grow your wealth through rental income or appreciation in value over time. It can also provide diversification to your portfolio by adding an asset class that is not highly correlated with the stock market.
However, real estate investing can be complex and requires careful research and analysis. You must understand the local real estate market, the costs and risks involved, and have a solid investment strategy before taking on real estate, so this tip won’t work for everyone. Consider working with a financial advisor or real estate professional to help you make informed decisions.
Invest in Yourself
Lastly, consider investing in yourself as a way to make your money work for you. Whether it’s learning a new skill, taking a course, or pursuing further education, investing in yourself can improve your earning potential and help you achieve your financial goals. By continuously developing your skills and knowledge, you can become more valuable to employers or clients, increase your income, and build a stronger financial foundation for yourself.
Additionally, investing in your health and well-being through exercise or nutrition can lead to long-term savings on healthcare costs and improve your overall quality of life. Be sure to prioritize investing in yourself as part of your overall financial plan.
Ready to Make Your Money Work for You?
Building wealth and making your money work for you may seem overwhelming, but with a comprehensive approach and the right mindset, it can be achieved through manageable steps. As a high-net-worth individual, it’s crucial to work with a team of advisors who understand your financial goals, risk tolerance, and unique situation. At Balboa Wealth Partners, we’re here to help. Give me a call at 949-445-1465 or email me at [email protected] to get started today. (Scottsdale office: 480-801-5100, [email protected])
Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected].
Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.
Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.
Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.