You’ve accumulated a large amount of wealth, but does your financial portfolio look its best? Most of us want to give our families the best that life has to offer for them. So, it’s important to avoid these three things that are damaging your family’s financial position.


1. Taxes

Most would agree that it’s not how much income you make, but rather how much you get to keep. The new Tax Jobs and Cuts Act of 2017 slightly lowered the tax burden for Americans who make more than $500,000 a year. But, the tax liability for wealthier Americans still stands at a steep 37%.

The answer is to implement strategies to reduce your tax burden as it’ll increase your income. More money will stay in your pocket rather than go to the IRS.

  • Retirement plans offer great solutions to reducing your tax liability. Delegate the full limit to a 401K plan or SEP plan. If you’re self-employed, create a retirement plan for your business. In 2019, the government will allow you to protect up to 25% of your income up to a maximum of $55,000 when you use an individual 401K or SEP plan to shelter your income. That translates to more growth for your future.
  • Manage your capital gains. Your long-term capital gains could be taxed up to 20%. The ordinary income tax rate applies to shorter-term gains of less than a year. The moral of the story is to have more longer-term gains than shorter ones, which will be taxed at 37% or more if you make over half a million. You could also harvest any losing investments you have to offset any capital gains you have.
  • Donate appreciated stock. Charitable contributions are a great way to reduce your tax liability. It has the dual benefit of helping a cause while not having to pay taxes on any gains from your stock. Long-term gains are better because you can deduct the full fair market value, whereas short-term gains are limited.

An experienced financial advisor can offer guidance on the best strategies for your circumstance.


2. Not having a financial plan in place.

It might surprise you to learn that 22% of wealthy investors who were surveyed admit to investing without having a plan.

Financial planning is an important part of improving your family’s financial position. It helps you to visualize your shorter term goals better. It allows you to see the full picture and plan better for the future. You’ll make more sound financial choices and manage your financial portfolio better when you have a financial plan.

So, what are important components of your financial plan?

  • Diversify your investments. Have more than one way to increase your wealth. Consider adding stocks, bonds, real estate, and alternative investments to the mix. The great thing about diversification is that if one investment underperforms, you’ll likely have growth in another.
  • Avoid having mutual funds held in taxable accounts. Capital gains and dividends can substantially hurt you during tax season. To minimize your tax burden on these, move funds that are generating income into your 401K or IRA account as investments in these are tax-deferred.
  • Review your plan with a professional advisor from time to time. Financial planning involves short-term and long-term outlooks. Your financial picture is bound to change over time and you’ll need to make adjustments to stay ahead of the game. Make sure your plan is still relevant and offers you the best advantages.


3. Avoid getting the wrong advice.

We’ve stressed how a CPA or financial advisor can help to plan and oversee your financial goals. But getting bad advice can hurt you more than help your financial situation.

A high-end financial advisor has the experience to deal with almost any eventuality and circumstance.

  • They’ll help you organize your finances while projecting and calculating your future financial standing. Financial advisors are professionals with a wealth of experience, no pun intended.
  • An advisor can help you be prepared for retirement. They’ll analyze whether you’ve invested enough, invested smartly, and when it’s time to change the status quo. They’ll find legal, creative ways to reduce your tax burden and maximize your investments.
  • A good advisor will create the projections needed to help you reach your financial goals. They’ll be focused on how you can best preserve your wealth. Make sure your advisor is certified in the area you want to focus on.

Managing your wealth doesn’t have to be rocket science. It’s simply a matter of finding clever ways to grow your money. A financial advisor can help to create and manage ways to improve your family’s financial position. They’ll also help you avoid the things that damage it.