Achieving financial independence, and having enough saved to comfortably retire is nearly a universal aspiration. Many want to have the freedom to pursue opportunities or hobbies without thinking about the implications for their finances. Being financially independent is a goal that many high-net-worth individuals (HNWIs) have and are working towards.
What is a high-net-worth individual, and what sets them apart from regular earners? More than numerical benchmarks, being an HNWI is a lifestyle incorporating strategic financial know-how to preserve and build wealth. This article delves into what it means to be an HNWI, including strategies to achieve and maintain such status.
What is a high-net-worth individual (HNWI)?
High-net-worth individuals possess at least $1 million in liquid assets, excluding liabilities and personal properties.
What Do HNWIs Do Differently?
The following traits reflect HNWIs’ proactive wealth-building approaches that set them apart from regular earners.
Adopting a holistic approach to wealth-building
Most HNWIs know that accumulating wealth goes beyond generating income—it also encompasses asset allocation, diversification, risk management and retirement planning, among many other strategies. So, they regularly review their financial situation for ways to maximize their wealth-building aspirations.
Prioritizing wealth preservation
Like regular earners, HNWIs prioritize income generation but also try to preserve and safeguard their accumulated wealth. To say that another way, they are up to building and securing their wealth. Specifically, they plan their investments and implement strategies to mitigate and control the level of risk their money is exposed to. In our experience HNWIs are often very informed and constantly monitor the risk and expected return their money is involved in.
Implementing risk management strategies
HNWIs understand the impact risks can have on their finances, so they implement proactive measures like getting insurance, proper asset allocation, and maintaining privacy to mitigate them. They usually conduct thorough risk assessments to identify weak points in their comprehensive financial plan.
Engaging in proactive tax planning strategies
HNWIs take advantage of tax planning strategies to minimize their government liabilities legally. Some leverage tax-deferred investment accounts, while others research credits and deductions applicable to their situations. We recently worked with a physician from Florida. This physician is a business owner of other physicians. He is completely focused on his earnings, the way he is taking on earnings and completely connected to the ways he can offset income to maximize his take home earnings. That’s exactly where he should be looking! It’s far more important to create planning and a structure to maximize what you can put in your pocket, not just earning more! This physician is looking at this brilliantly. Tencap is proud to be working alongside business owners like this, creating intelligent, lucrative and certainly ethical ways to reduce taxes and maximize earnings.
Planning for wealth transfer
HNWIs recognize that the efficient transfer of wealth is a great way to ensure their legacy lives on for generations to come. They often implement estate planning and wealth transfer strategies that will smoothly transition assets to their descendants while minimizing tax implications, all while establishing controls around liability. They use all sorts of planning tools in this category such as trusts or entities to create succession plans to facilitate this objective.
How to Become a High-Net-Worth Individual
Want to build wealth and become an HNWI? The journey may vary for each person, but these key steps can enhance your prospects of becoming one.
Increase your income and save most of it
Is your money enough to become an HNWI? If not, consider increasing your income through career advancement or entrepreneurship to create a foundation for your wealth. It’s also essential to make a habit of saving most of your income. This tactic means living below your means, avoiding overspending, and allocating a portion of your earnings toward investment to generate long-term wealth.
Pay off your debts and mortgages
Loans and debts are the enemy of financial progress, undermining your wealth-building efforts. So, make it your primary goal to pay them off. Prioritize high-interest debts like credit card balances and personal loans. At the same time, consider accelerating payments toward mortgages and other liabilities so that you can immediately put your money toward savings and investment accounts. Does this mean you should not have any debt? No, there is a place for debt. There can be wisdom in debt. However, there is prudent debt and ignorant debt. Our team can help you get clear on which type of debt you have.
Invest wisely and diligently
As mentioned, investing is crucial to building wealth long-term. Tencap can help you explore different investment options, asset classes, and risk-return profiles to develop a well-diversified portfolio aligned with your financial goals. Regardless of what you are considering investing in, you should be really clear on two things: 1) Expected return. 2) Level of risk. If you can’t identify or measure that, we would suggest getting some coaching from a financial advisor who can help you plot and measure those two things. Investing can be sensible, wise and systematized. If you don’t relate to investing that way, are you willing to take on some coaching in that space?
Optimize your retirement accounts
Retirement planning for your retirement ensures you have enough money to sustain your needs and lifestyle when you’re no longer in the workforce. So, maximize your contributions to tax-advantaged retirement accounts, and leverage employer-matching contributions to maximize your funds. Additionally, there are many account types that you may not have heard of. Recently we met with a physician who was clear on making out their 401k, but really had no other ideas on where else he could place pre-tax money. We were able to coach him on several additional ways to save pre-tax money!
Talk with a Certified Financial Planner (CFP®)
You don’t have to implement these strategies alone. Skip the guesswork and enlist the help of a Certified Financial Planner (CFP®) who can provide valuable insights as you navigate your finances and develop a comprehensive wealth management strategy. CFP’s assess your financial situation, identify areas for improvement, and tailor recommendations to help you achieve your financial goals.
Build Wealth with Tencap Wealth Advisors
You must be dedicated, disciplined, coachable and strategic to increase your net-worth. Adopt the practices above to support your wealth-building efforts and attain financial security. Don’t be mistaken—you’ll face challenges and speed bumps on your journey, but prudent decision-making can help you overcome obstacles with less effort and realize your financial aspirations.
It also helps to have a trusted professional on your side to guide you through your journey. Tencap Wealth Coaching’s advisory services have helped numerous high-net-worth individuals build and secure their wealth. We pride ourselves in helping each client reach their financial goals and be at-ease around money and investing – we can do the same for you.
Would you like some coaching from a financial advisor? Schedule a no cost appointment with us, today.
The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Utah or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
Nick Carrigan
Nick trains and develops families in creating, maintaining, and growing wealth. This includes educating clients on the science and academics of investing, comprehensive financial planning, and ongoing coaching to ensure discipline for a lifetime. Nick has seen this create incredible levels of freedom, fulfillment, and love for the families he works with.
