For millions of Americans living paycheck to paycheck, even the most basic level of financial security remains elusive. So, if you’ve managed to build a small fortune, you might feel like you have it made.
But now is no time to get complacent — remember, it’s much easier to lose money than it is to earn it. Amassing wealth is the first step in securing prosperity for yourself, your family and your heirs. That’s the hard part, which you’ve already conquered. Now you have to safeguard everything you’ve spent all that time building.
Few people know more about protecting wealth than estate planning attorney Celeste Robertson, who serves high-net-worth clients through her firm, The Law Offices of Celeste Robertson, which has multiple offices in Texas.
Here’s the financial planning advice she offers her well-to-do clients to help them enshrine legacy wealth for the future instead of making their riches a thing of the past.
One of the dangers of building wealth is that your money can begin to feel infinite. It isn’t — and whether you made $50,000 or $50 million last year, it is a mathematical certainty that you will lose your financial security if you get in the habit of spending more than you earn.
“Wealth preservation depends on the discipline to live below one’s means,” Robertson said.
Because spending tends to rise with income, lifestyle inflation can rob your wealth no matter your salary, but it doesn’t have to.
“Just because one has achieved wealth doesn’t mean extravagant lifestyles should deplete their reserves.”
Like living within your means, investing it in different asset classes makes sense for everyone on the income spectrum.
“One of the cardinal rules I advocate for is diversification,” Robertson said. “It’s essential to spread wealth across a mix of assets to mitigate risks and navigate market volatility.”
Currently, millionaires are hoarding large sums of cash to capture today’s high savings yields while also enjoying full liquidity and the security of FDIC insurance.
Depending on their investment philosophy, the rich might also spread their money around to stocks and stock funds, bonds, real estate, commodities and crypto, just like ordinary investors. But if your net worth is sufficient to qualify you as an accredited investor, you can pursue higher-risk, higher-reward opportunities that are off limits to lower-capital investors. They include things like hedge funds, private equity investments, interval funds, hard money loans, venture capital and real estate syndication.
In 2017, wine surpassed classic cars as the top-performing collectible for rich investors. The value of vino had soared by 25% in just 12 months and by more than 60% over the previous five years. Like all asset classes, the value of collectibles ebbs and flows over time. Six years later, some wonder whether alternatives like antiques, stamps, jewels, sneakers or comic books are now better bets than wine.
But one thing is certain: Wealth gives you the opportunity to dedicate a portion of your portfolio to exotic asset classes that aren’t tied to the performance of standard investment markets and that can provide a hedge against inflation.
“Investing in art, collectibles or alternative assets can be both a passion and a strategic move,” Robertson said. “These non-traditional investments can offer tax advantages, diversification and potential appreciation over time.”
Keep in mind that appreciation is the only way to benefit financially from collectibles. They can’t generate income, distribute dividends or pay interest.
Everyone across all income levels should have a will, but significant or complex assets require a more sophisticated legal arrangement to ensure an accurate, tax-efficient and cost-effective transfer of your wealth to your heirs when you die.
“Effective estate planning is a cornerstone of safeguarding wealth,” Robertson said. “Crafting a thorough plan that encompasses wills, trusts and tax strategies ensures generational wealth transfer with minimized losses.”
Wealth comes with responsibility, and diligence is the final step in protecting the financial security you’ve built. If you’re rich, the best way to stay that way is to enlist a wealth manager, attorney, tax professional and estate planner, and check in with them frequently.
It’s up to you — not them — to periodically revisit your investments, cash holdings, spending, budget and estate plan as your wealth, the markets and the economy evolve so you can make any necessary adjustments.
“Regular financial reviews and adjustments are crucial,” Robertson said. “The financial landscape changes, and so do personal circumstances. Periodic reassessments keep one’s wealth strategy agile and relevant.”
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