How to Protect Your Wealth
When you’ve built up a decent amount of money, you need a plan to protect your wealth.
Otherwise, why spend all that time becoming wealthy?
I mean, yes, you can keep some of your money secure in a bank account. But over time, inflation will slowly start eating away at your wealth.
Reducing the value of your money over time.
However, it doesn’t have to be this way. You can protect your wealth by taking an active approach.
All you have to do is diversify your
Let’s discuss this more.
Why You Need to Protect Your Wealth
Once you start earning over $100,000 or have that much money invested, you need to start thinking about spreading your wealth around to protect its value.
If you keep your wealth in cash, as I said, over time, you’ll have lost value due to inflation. Your money won’t buy you the same amount of gas, food, and whatever else you like to purchase.
It will have gotten weaker which = Inflation.
Inflation and everyone trying to get some of your money is why you need to protect your wealth.
Some high-income earners put their money in a private bank account while many others favor a stock brokerage account.
But, since the FDIC only insures accounts up to $250,000, you may need to put your money in more than one bank or credit union. And if you didn’t know yet, the FDIC doesn’t protect stocks, bonds, and CDs.
SIPC insurance protects customers with stocks, bonds, and CDs up to $500,000.
And you also need to protect your wealth from unforeseeable events that are out of your control.
For example, the financial collapse of 2008 was a wake-up call that retirement accounts can shrink a lot when economic factors shake up the market.
Like COVID did twelve years later in 2020.
Do What Other Wealthy People Do
Many wealthy people buy gold when they don’t know if the stock market will go up or down for a while.
Gold has always maintained a steady value in the past decade. But I think a better asset in the form of
Caution: I don’t recommend any other cryptocurrency besides
Bitcoin is a once-in-a-lifetime savings technology designed to store the value of your hard-earned money. It will keep up with and outpace inflation.
And if you don’t want to invest in stocks, gold, or
Understand Opportunities Come and Go
While there are always market sectors that are rising in value, you need to choose your
Stocks move up and down, and sometimes they take many years to generate profits. Ideally, you want the value of your stock portfolio to always go up. This is why I think buying and holding index funds is a great wealth-building strategy.
However, before purchasing any investment, please do your research on it.
Don’t just jump on trends that are briefly hot and then decline. That’s what’s going on in the cryptocurrency market right now.
Instead, set aside some time to learn about the long-term profitability potential of what you’re investing in.
Because knowing what you’re invested in as well as the risk involved is the #1 way to protect your wealth.
In the early 2020s, there’s growing interest in market sectors such as electric vehicles, renewable energy, and digital innovations. The real estate market has been on fire as well.
But it won’t always be this way.
This is why it’s important to understand certain trends repeat in cycles while others disappear or transform into new directions.
Turn Debt Into Profits
People often think debt is negative. But it can be positive for those who borrow and invest the money they borrowed strategically.
Plus, if you create a larger gap by:
- Making more money, and…
- Owning more assets
You’re going to become wealthier over time. More diversified assets and money will reduce the chance of you ever being broke again.
The more money you put into an asset at a different price over time = the better your chances of making a profit.
A large amount of money is also perfect for
But the larger your investment account is, the more effective you’ll be at managing and reducing that risk.
Millionaires routinely borrow cash against their existing assets.
It allows them to increase their positions in stocks. Plus, if their
Learn From Others to Avoid Costly Mistakes
It’s typical for an individual who inherits six figures to spend the money quickly on lifelong dreams.
Instead of protecting their wealth, they’re destroying it.
People who find themselves suddenly wealthy often buy new homes and cars. But if you want to protect your wealth, don’t do this.
Purchase assets that’ll eventually make you wealthier. THEN use that money to purchase the things you want.
Here are some of the major mistakes people make when they first come in contact with a lot of money:
1. They Don’t Create a Budget
If you don’t create a budget (spending plan) and don’t put money into savings and investments, your wealth can and will decrease steadily.
Without a budget, people tend to forget about their cash balances and goals. That’s the path to wealth decay and debt.
Without a budget, you’re going backward. Budgets protect your wealth.
Make one!
2. Lack of Long-Term Planning
High-income earners need to establish an estate plan and revisit it every few years to consider changes.
Through an estate planning attorney, you can make sure your assets are appropriately protected.
Because suppose you have kids or are raising a family. In that case, you should consider a life insurance policy that provides benefits to your loved ones.
To me, there’s no point in becoming wealthy if you can’t pass it along to your loved ones, charities, or causes you care about.
3. Going On Frequent Shopping Sprees
People who inherit a bunch of money can become very impulsive shoppers who drain away their wealth fast.
I have a friend whose grandmother passed away and left his dad $500k, and a few months later, it was all gone.
So, it’s better to restrain yourself from going on spending sprees. At least for a while until you own more assets that pay for your shopping sprees.
Most of the time, when we spend money, we don’t even think about it.
We’re often driven by boredom or social pressure.
And unless you’re buying an investment property or stocks, most “things” and products lose their value as soon as you buy them.
4. Failure to Learn About and Max Tax Advantages
Taxes become much more important when you make it to the six-figure range.
Yet another reason why you need to educate yourself and learn how to protect your wealth.
No one cares or will care about your wealth and money as much as you do. Learn and take advantage of as many tax benefits as possible.
Unless you like paying the government more than you need to.
5. Buying Investments Without Doing Research
Many people like to invest without learning about what they’re
Instead, do your research before buying anything. Doing research will protect the wealth you’ve taken the time to build.
And doing research can be simple and easy.
Read a few different blog posts, watch some YouTube videos from other people, or check out a Podcast on the subject.
Get Money, Buy Assets
If you invest a big stack of cash in a new car, the value will decrease significantly the minute you drive it off the lot.
When the goal is protecting your wealth, I think the best path to success is buying more assets and diversifying your wealth. Assets that can appreciate exponentially.
Such assets include stocks, real estate, businesses, and
Putting money in the stock market by purchasing index funds at least gives you a chance at expanding your wealth. And it’s time-tested.
The goal is to build more passive
Income streams that’ll grow larger and larger over time for the rest of your life.
Index funds are one of the safest ways to maintain and grow your money. And diversifying across different asset classes is the best form of wealth protection anyone can have.
Practice Risk Management
Every investment accompanies a risk that its value will decline.
Risk management is the difference between investors whose wealth doubles in value and those who see their wealth decline. And part of that risk management is making sure you have an emergency fund.
Having money you can easily access during times of need will shield your wealth from many unforeseen events.
Your emergency funds are bodyguards who look out for your wealth when shit goes wrong.
And along with your emergency fund, you should also purchase separate insurance coverage like home, auto, term, and umbrella coverage.
I won’t go into detail about each of them, but do some research, buy the insurance, and protect your wealth.
Yes, it will cost you some money. But, you want to pass the risk onto the insurance company.
Conclusion
Becoming wealthy puts you in a different league of players than most people.
However, to stay wealthy, you need to protect your wealth. This is done by staying up to date on changes that might affect you and your wealth.
So never stop learning. Rules and laws change all the time. And protecting your wealth is just as important as growing it.
You can’t set it and forget it when it comes to your money. No!
Review your financial goals, do it often, and adapt to protect your wealth if you need to.
