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Wealthy individuals often have a different approach to managing their finances. Their financial success isn’t solely the result of luck, but rather a combination of strategic moves and prudent decisions. In fact, the 2023 Northwestern Mutual Planning and Progress Study explains that 84% of high-net-worth individuals have a financial plan that factors for up and down economic cycles over time. To add, a Moneyzine report indicates that just 26% of U.S. adults say that financial advisors are the most trusted source for financial advice.
As a financial planner who has worked with high-net-worth clients, Malik S. Lee — CFP, CAP, APMA and the founder of Felton & Peel Wealth Management — has observed certain common behaviors and strategies that consistently set them apart. Writing for Insider, Lee laid out the three factors that most of his wealthiest clients had in common.
1. Their Most Significant Yearly Expense is Savings
While some people allocate a significant portion of their income to cover various expenses, wealthy individuals often prioritize savings above all else. Their most substantial yearly expense isn’t a lavish vacation or a high-end car — it’s savings, a non-negotiable part of their financial plan.
“In fact, my most affluent clients consistently save 25% or more of their gross income annually,” said Lee.
Individuals who are diligent savers earmark a significant portion of their income for savings and investments before allocating funds to cover other expenses. This disciplined approach enables them to build substantial wealth over time. As a general rule of thumb, it’s recommended to save about 10% to 15% of your gross income, then increase it annually or when cash flow permits.
2. They Are Great at Understanding and Managing Risk
Wealthy clients are not risk-averse, rather they are skilled at understanding and managing risk effectively. They approach risk with a balanced perspective, recognizing that it is an inherent part of investing and wealth-building. Acquiring wealth is only the first step.
“If we use this same metaphor on the topic of wealth, it goes along with my belief that more ‘wealth casualties’ are sustained trying to maintain wealth than accumulating it,” Lee indicated.
Affluent Americans protect their wealth from risky investment decisions, inflation, impulsive spending, etc. Also, they understand the additional costs that come with getting older: high medical insurance premiums, disability insurance and so on. There are many factors to take into account when it comes to financial risk and aging.
3. They Have a Team of Experts on Their Side
Wealthy individuals recognize the value of expertise and often assemble a team of financial professionals to guide them in various aspects of their investments. This team typically includes financial planners, tax specialists, estate planning attorneys, and investment advisors. Having a team of experts provides these individuals with a comprehensive and tailored approach to building wealth.
“At the end of the day, my most successful clients are very consistent and committed, and they use a team of experts to accomplish their most desired financial goals,” explained Lee.
The financial success of wealthy individuals isn’t solely a result of chance or luck. Instead, it’s built on a foundation of strategic moves and prudent decisions. While their strategies may differ from one person to the next, the principles they follow can serve as valuable lessons for anyone looking to enhance their financial well-being.
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