7 Things To Do When You Start Making 7 Figures
By Brian Famigletti, Managing Director & Head of Marketing
If you recently started making 7 figures, congratulations! Joining the “7 Figures Club” is no small feat, and certainly cause for celebration.
However, this milestone also means it may be time to reassess your finances to ensure you have everything in order. Here are 7 crucial steps to take when you start making 7 figures.
1. Reassess Your Goals
The cornerstones of any financial plan are clearly defined goals, in regards to both finances and life.
When making $1 million or more annually, your goals can change or expand. Things that once seemed impossible may now be within reasonable reach. Defining clear goals is key to guiding your financial plan and your future trajectory.
2. Tax Planning
A higher income might bump you up to a higher tax bracket, making effective tax planning more important than ever.
It may be worth consulting with a tax professional to identify any tax planning strategies available to you, both to reduce your tax liability year-to-year and create sustainable long-term plans.
Managing your investments to optimize taxes is another strategy to deploy at this milestone. You might also begin to utilize annuities or life insurance for tax deferral purposes.
3. Estate Planning
Most millionaires don’t find themselves making 7 figures out of nowhere. You’ve likely been working toward this goal for some time, and quite possibly accumulating substantial assets along the way.
Sitting down with an estate attorney to draft a will and name beneficiaries is an important step in planning for the future of these assets. Having a plan in place can help ensure your loved ones’ well-being and peace of mind.
4. Put Together a Dream Team
Making (and managing) your millions can be a daunting task. Working with a team of experts may lighten the load and result in more efficient financial management.
Often, this team will include a financial advisor, a certified public accountant (CPA), and an estate attorney to provide relevant expertise at each stage of your wealth journey. It is typically advisable to meet with each expert to discuss your goals and outline your financial map.
5. Keep Your Expenses in Check
No matter how much money you make, living below your means is an effective method to stretch your funds further.
Even millions of dollars can go quickly if the right spending, saving, and budgeting habits aren’t established. Building and sticking to a realistic budget that supports your lifestyle while minimizing unnecessary expenses can keep you on the road to financial success.
At the same time, there’s nothing wrong with planning and budgeting for a high-ticket purchase, so long as you have crunched the numbers and made sure you can afford it.
6. Plan for Retirement
Just because you’re making 7 figures now doesn’t necessarily mean you will continue to do so when you stop working. No matter how much you earn throughout your life, retirement planning remains a key pillar of building and sustaining wealth.
One of the most important steps to planning for a successful retirement is determining what kind of lifestyle you anticipate living in your golden years, and how much it will cost to fund.
The earlier you put a retirement plan into place, the better. Those with higher annual income can also save on taxes by utilizing strategies like a backdoor Roth, which entails funding a traditional IRA and then converting it to a Roth IRA to circumvent Roth income limits.
Related Reading: Navigating the Ever-Changing World of RMD’s
7. Investment Management
It is particularly important to make sure that your investments are aligned with your goals and time horizon when your assets and income are substantial.
Leaning on a professional to assess your portfolio and make any necessary adjustments can make a world of difference. This last step is vital to ensure that your investments are suitably diversified and appropriate for your age and income level.
With any changes in your financial situation, talking to a professional can help. If you need some assistance in any of these steps (or just want some helpful guidance along the way) schedule a consultation with Griffin Asset Management today.
Sources:
Smart Asset: 7 Critical Tips for Estate Planning
DeLeon & Stang: Why Tax Planning Is Important
360 Financial: What Is the Purpose of Goal Setting in the Financial Planning Process?
