Congratulations — you’ve reached a net worth of a quarter-million dollars. What do you do now?
As you build your wealth, your needs and challenges change. You — and your money tactics — need to change with them.
Read Next: I’m a Financial Advisor: My Wealthiest Clients All Do These 3 Things
Learn More: Are You Rich or Middle Class? 8 Ways To Tell That Go Beyond Your Paycheck
Here are six money moves to get even richer after you hit that net worth milestone of $250,000.
In the early stages of saving and investing, the mission centers around forming good habits. These include budgeting, saving as much as possible, avoiding unsecured debt and getting comfortable with investing.
You’ve passed that stage. Now you need to get more strategic.
Start by setting a target. What’s the finish line? What net worth would let you quit your day job?
If you don’t know how to come up with that number, multiply your annual spending by 25 as a simple rule of thumb. But at this stage, you’re likely ready for professional help.
“When you reach $250,000 net worth, you need to meet with a financial planner,” said Melanie Musson, a finance expert with Clearsurance.com. “You’ve set a solid foundation, now it’s time to develop a goal for your future — and a path to reach that goal.”
Find Out: 4 Secrets of the Truly Wealthy, According To Dave Ramsey
As investors make progress, they should keep aiming to invest more, not let their foot off the gas.
Charles Nemes, CEO of Nemes Rush Family Wealth Management, noted that reaching a milestone doesn’t mean you should lose sight of the fundamentals. “Saving first and spending second is by far the most successful way to achieve financial independence for you and your family,” he said. “Money that sits in a checking or savings account finds a way of getting spent. Move the funds to be invested and sequestered as soon as possible!”
The higher your savings rate, the faster you build wealth and reach financial independence.
Maybe you’ve gotten away with a $1,000 emergency fund up to this point. But part of a sound independence plan involves keeping enough cash so that you don’t have to raid investments early, when unexpected expenses rear their ugly heads.
Most households measure emergency funds in terms of the number of months of living expenses they can cover. Households with stable, secure incomes and steady living expenses can get away with two or three months’ worth of expenses. Those with unstable income or expenses should budget more, such as six to 12 months’ worth of expenses.
When in doubt, ask a financial planner how much you should set aside in cash.
If you carry high-interest debts, such as credit card balances, personal loans or student loans, aim to pay them off as soon as possible.
“Eliminating high-interest debt is an oft-overlooked strategy for people with a quarter-million dollars or more in net worth,” said Alissa Krasner Maizes, founder and 10 Genius Things Warren Buffett Says To Do With Your Money at Amplify My Wealth. “It can give an instant budget boost while also preventing lifestyle creep.”
Once you’ve paid off your credit card balances, make sure you never charge more to them than you can pay off in the same month.
Uncle Sam takes his share from your income — to the extent that you let him.
“As you plan how to invest your savings, always look at tax-advantaged investment opportunities first,” Krasner Maizes said. “That starts with matching retirement contributions from your employer, but also extends to your IRA or Roth IRA, or an HSA.”
The less you pay in taxes, the more you can put toward building wealth. It’s that simple.
Every adult needs an estate plan, such as a will and possibly a living trust. But adults with a $250,000 net worth need one more than the average person.
Consider starting with a simple will from an online platform like LegalZoom or LawDepot. As your net worth grows further, you can always pay an attorney thousands to draft a custom one for you, but for now just make sure you have something in writing.
Just as importantly, give a signed copy to someone you trust to execute your estate plan if you meet an untimely end.
You should feel proud of reaching a $250,000 net worth. It’s a milestone worth celebrating. But it’s not the finish line, and as you reach the next milestones, your needs will change again. You can look forward to your financial expertise continuing to evolve and grow — right alongside your money.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 6 Money Moves To Get Even Richer Once Your Net Worth Hits $250,000
Source link
