Have you worked hard and find yourself in a solid financial situation? Feeling pretty good about your net worth? Guess what: Wealthy people need the scoop on secrets to financial success, too.
You likely didn’t get to this point of not worrying whether there’s money in your bank account without some smart money management, but that doesn’t mean you can’t benefit from learning a new financial lesson or two.
Here are seven financial “secrets” you should know.
Invest early and often
It can’t be said enough: There’s enormous power in beginning to invest early, thanks to compound interest. There’s also great power in frequently contributing to the savings accounts or investment accounts that fit your financial goals (such as once a month contributions to your 401(k)).
And the great part for you is that now that you’ve built some wealth, you have more to invest, so you can recognize firsthand the exponential impact of this nugget.
Patience and investing are natural partners. In fact, one of the secrets to investor Warren Buffett’s success is the fact that he famously views investing as a long-term prospect.
For most people, there is no such thing as getting rich quick. Instead, practicing patience during the investing process will help investors reach their goals. On the other hand, impatience has been shown to hurt returns. Realize that patience can be a learned behavior — most people don’t innately have it, especially when it comes to money.
Invest so that your money is working for you
For many people, they feel they’ve made it when their money is making money, rather than when they can only make money by toiling away at their jobs. One of the things that separates the wealthy from those who wish they were is multiple sources of income, including passive income, which can be generated in a number of ways (equities investments, real estate, and so on).
Live below your means
This isn’t just about preserving cash flow by curbing your spending habits; it’s about the bigger picture of preserving and continuing to accumulate your hard-earned wealth. That doesn’t mean you shouldn’t enjoy certain things that your money can buy, but you should certainly plan and budget spending money and not exceed a certain percentage of your overall wealth each year.
$1 million isn’t that much
It used to be that having $1 million dollars in the bank meant you’d arrived, but that sum doesn’t go as far today as it used to. Consider this: One widely recommended withdrawal rate in retirement is 4%/year. Four percent of $1 million is $40,000 — perhaps not enough to live on for the average couple, especially when you take into account escalating health care expenses.
Make sure you have a plan — and make it boring
Setting a financial plan in the first place, then reviewing and adjusting your current plan at regular intervals is one key to success. Working toward financial goals isn’t supposed to be the exciting part. But if you are prudent in your approaches to investing and money management, it will no doubt be exciting to see your wealth grow.
Don’t rely solely on your own financial expertise
We believe that personal finance shouldn’t be kept entirely personal if you want your wealth to continue to grow. We think you need a good accountant, tax professional, wealth advisor, and attorney.
Even if you consider yourself to be financially savvy, you ought to work with professionals you can trust who are much savvier than you are and can help you make the most of your money. One reason this secret can be so successful is that the professionals you work with can help you stay the course and steer you away from the emotional decision-making that can wreck a financial plan.
Ironwood Wealth Management is ready to offer its professional expertise to help you safeguard your wealth and ensure it continues to grow, so that you can meet your financial goals. Contact us to get started on a personalized, strategic financial plan today.