Five financial planning secrets for millionaires

Millionaire. This word is a source of envy for many – for good reasons beyond the obvious financial benefits. According to Northwestern Mutual’s 2024 Planning and Progress Study, 87% of American millionaires say they have a clear idea of how much they should save for tomorrow and spend today, compared to just 66% of the general population. They also feel much more prepared: 87% of millionaires expect to be financially prepared for retirement when the time comes, more than 30 percentage points higher than the average American.

While “very rich” status remains elusive for most people, the rich practice five financial habits to build and maintain their wealth that anyone can use to achieve greater financial security.

1. Focus on the big picture

When it comes to wealth, millionaires look beyond today’s problems and plan for a brighter future. Eighty-four percent say their financial plans are designed to mitigate long-term risks such as market ups and downs, while only 52% of the general population say the same.

Subscribe to Kiplinger’s Personal Finance

Be a smarter and better informed investor.

Save up to 74%

Sign up for Kiplinger’s free e-newsletters

Profit and prosper with the best expert advice on investing, taxes, retirement, personal finance and much more – straight to your e-mail.

Profit and prosper with the best expert advice delivered straight to your inbox.

As life expectancy continues to rise, millions of Americans will live longer, so most financial experts agree that financial plans should be designed to last accordingly. Many economic changes are likely to occur over a long period of time, including recessions, periods of high inflation, higher taxes and rising health care costs. By anticipating and planning for key financial risks—and the big picture—people can ensure long-term financial security.

2. Take action, but don’t overreact.

Despite having money, rich people do not stop there. They know the value of a clear financial plan, and 78% describe themselves as disciplined or highly disciplined planners, but they have specific financial goals and take the steps necessary to achieve them.

A financial plan can help people evaluate where they are today, set goals for tomorrow, and take the necessary steps to achieve them. People can work with an experienced financial advisor to create a comprehensive financial plan that does just that. By following this plan and taking advice from their advisor, they can ensure that they are sticking to the plan to achieve their long-term wealth creation goals.

3. Don’t take risks

Millionaires don’t take risks when it comes to their money, and their financial advisors help ensure that their financial plans take into account situations that could put them at risk. Eighty-nine percent of wealthy people have an emergency fund, compared to 60% of the general population who say the same. Additionally, 79% of wealthy people have a plan to cover health care costs—versus just 49% of the general population. And 68% of wealthy people have included long-term care in their financial plans; only 40% of the general population do so.

A comprehensive financial plan is vital and should include an emergency fund, healthcare expenses and long-term care. The plan should include a savings amount equal to three to 12 months of living expenses (depending on the individual’s situation) to provide the flexibility and financial security needed in times of financial uncertainty. If a health emergency results in permanent disability, disability income insurance can help protect people’s most valuable asset: their ability to earn an income.

4. Stay optimistic about what you can’t control.

Inflation, economics and social security. Wealthy Americans tend to remain optimistic on these issues, thanks to their well-thought-out financial plans that can handle key risks. Eighty-four percent of millionaires have a financial plan, compared to 52% of the general population. Even if people cannot control the future, a good financial plan can help them anticipate and face the future with confidence, no matter what happens in the economy or politics.

5. Seek professional financial advice

Sixty-nine percent of millionaires work with a financial advisor, compared to just 33% of the general population (and wealthy people rate financial advisors as their most trusted source of financial advice), more than four times higher than any other source, including a spouse. Friend. With an experienced financial advisor at their side, people are more likely to take the strategic actions needed to achieve their long-term goals.

According to Northwestern Mutual’s 2024 Planning and Progress Study, only one in three millionaires feels “rich.” For most, they say “feeling like a million dollars” is less about believing in your wealth and more about exuding confidence and clarity about the future.

Money alone doesn’t create clarity—financial habits and a solid financial plan do. When people have a comprehensive plan tailored to their life and an advisor who helps them see their opportunities and blind spots, anxiety decreases and security increases—as they build wealth and protect what they’ve already created. .

This article was written by and represents the views of our consultant and not the editorial staff of Kiplinger. You can check consultant records using SEC or with FINRA.

Five financial planning secrets for millionaires

1. Focus on the big picture

Archives

Categories