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Five Financial Planning Secrets of Millionaires

Harry November 2, 2024

Millionaire. It is a word that is a source of envy for many; for good reasons beyond the obvious financial advantages. Accordingly Northwestern Mutual’s 2024 Planning and Progress Study87% of American millionaires say they have clarity about how much they should save for tomorrow and how much they should spend today, compared to only 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; that’s 30 percentage points higher than the average American.

During being “very rich” Although it’s a difficult subject for most people to understand, the wealthy practice five financial habits to build and maintain their wealth that anyone can use to achieve greater success. financial security.

1. Focus on the big picture

When it comes to wealth, millionaires look beyond today’s challenges and plan for a brighter future. While 84 percent say their financial plans are designed to reduce long-term risks such as market ups and downs, only 52 percent of the general population say the same.

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As life expectancies continue to increase, millions of Americans will live longer; Therefore, most financial experts agree that financial plans should be designed accordingly. Many economic changes are likely to occur over a long lifetime; these include: recessionsPeriods of high inflation, high taxes, and rising health care costs. By anticipating and planning for key financial risks and the big picture, people can position themselves for long-term financial security.

2. Take action but don’t overreact

Rich people are unhappy with their financial situation even though they have money. They know the value of a solid financial plan, and 78% describe themselves as disciplined or highly disciplined planners; but they have specific financial goals and are taking the necessary steps to achieve them.

A. financial plan It can help people evaluate where they are today, set goals for tomorrow, and take the necessary steps to achieve those goals. with someone experienced financial advisorpeople can create a comprehensive financial plan that does just that. By following this and getting advice from their advisors, they can ensure they stick to their plan to achieve their long-term wealth-building goals.

3. Don’t miss your chance

Millionaires don’t take chances when it comes to their money, and their financial advisors help their financial plans address situations that could expose them to risk. Eighty-nine percent of the rich emergency fund60% of the general population says the same thing. Additionally, 79% of rich people have a plan to solve this problem. medical expenses — compared to just 49% of the general population. 68 percent of the rich long term care incorporated into their financial plans; only 40% of the general population does.

A comprehensive financial plan is vital and should include an emergency fund, health care expenses, and long-term care. A plan should establish a savings amount of between three and 12 months of living expenses (depending on the individual’s situation) to provide the flexibility and financial security needed when faced with financial uncertainty. If a health emergency causes permanent disability, disability income insurance It can help protect people’s most valuable assets: their ability to earn income.

4. Stay optimistic about what can’t be controlled

Inflation, economy and Social Security. Wealthy Americans tend to remain optimistic on these matters because of well-thought-out financial plans that can withstand significant risks. Eighty-four percent of millionaires have a financial plan, compared to 52 percent of the general population. Even if people can’t control the future, a good financial plan can help them anticipate and look to the future with confidence, no matter what happens economically or politically.

5. Get professional financial advice

Sixty-nine percent of millionaires work with a financial advisor, while only 33% of the general population—and wealthy people consider financial advisors their most trusted source of financial advice—more than four times as many as other sources, including a spouse or spouse. My friend. With an experienced financial advisor, people are more likely to take the strategic steps necessary to achieve their long-term goals.

Only 1 in 3 millionaires feels “wealthy,” according to Northwestern Mutual’s 2024 Planning and Progress Survey. Many people say that “feeling like a million bucks” is less about believing they are rich and more about exuding confidence and clarity about the future.

Money alone does not create clarity — financial habits and a solid financial plan ensures this. When people have a comprehensive plan created specifically for their lives and an advisor to help them see their opportunities and blind spots, their feelings of anxiety decrease and their sense of security increases as they create wealth and protect what they have already built.

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