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Harv's Corner 12/16/2024

12/16/2024

7 WAYS TO INVEST LIKE YOU’RE RICH
By JAMES ROYAL • Bankrate.com

Forget get-rich-quick schemes. Building true wealth is a marathon, not a sprint. It demands a strategic approach to investing, one that aligns with your financial goals and prioritizes informed decision-making. This article explores the key principles of wise investing, setting you on the path to lasting financial security and abundance.

The average American says they need an annual income of $520,000 to feel rich, according to Bankrate's latest Financial Freedom Survey. While earning a lot of money may make you feel rich, there's no amount that you can't outspend.

So, if you're not transforming your high earnings into actual wealth, then you're not a member of the rich but rather just a high-wage earner.

If you're not rich — and most of America isn't, even if the average American household has $1.1 million — then you'll need to build wealth. Everyone has to start somewhere, and one of the best places to begin is to imitate those who do it.

If you want to be a runner, then you start running, even if you don't know how at first.

It's the same with becoming wealthy — emulate the strategies of the wealthy to grow your own wealth. (Working with a financial adviser can help you set up a game plan to meet your wealth goals.) Here's how to invest like the rich even if you aren't there yet.

1. Take more risk
One of the biggest advantages of having wealth is that you can take more risks with investments that have higher long-term returns. If you're piling money into high-yield savings accounts and CDs each month — even high-yielding accounts — you're losing out over time on the returns on stocks. The stock market, as measured by the Standard & Poor's 500 index, has returned an average of 10% annually over long periods — way more than you can make in a bank.
Being able to take that extra risk means compounded returns over time, enabling the rich to get richer. But even small investors can start investing with the best brokers for beginners.

2. Invest with a long-term mentality
The rich also have a longterm ownership mentality when it comes to their investments.

They're not thinking about making a great score from a quick trade today but about building wealth over time. And time is something that people, regardless of economic class, can take advantage of.
Time is your biggest ally when it comes to investing, and you can compound significant money even without having the very best investments.

So when you hear about the world's wealthiest people, it's important to understand that even they built their wealth over decades, if not longer.

3. Let a financial adviser do the work
One of the advantages of being wealthy is that you can outsource your investing to professionals who know all the ins and outs of that world. The best financial advisers know how to maximize your gains, how to minimize your taxes and how to help clients plan their financial life.
A financial adviser allows the rich to focus on other activities that build their wealth even more or focus on other areas that provide meaning, such as spending time with family.

Bankrate's financial adviser matching tool can match you with advisers in minutes.

4. Invest first, spend later
It's not only what the wealthy invest in but also how they invest that drives their fortunes.

Investing in productive, wealth-building assets takes priority over spending. Those who are building wealth focus on owning assets that increase in value over time rather than on consumption today.

Many of America's millionaires drive humdrum cars and live in modest houses — not the flashy Lambos and opulent mansions that you see in Hollywood films and on social media. These people built their fortunes by focusing on investing first and living below their means.

5. Stuff those retirement accounts
Retirement accounts are another great tool the wealthy use to grow their money. The best retirement accounts let you reduce or eliminate taxes on your investments, letting you compound your money for decades. You can save tens of thousands annually in these special plans and then invest your money in potentially high-return investments, such as stocks and stock funds.

For example, with a traditional 401(k), you can invest up to $23,000 (in 2024), while those aged 50 and older can put away an additional $7,500. On top of that, many companies offer thousands more in free money as part of an employer match. The wealthy are taking advantage of it all.

Any American with earned income can also take advantage of an IRA to save thousands more. However, it is important to note that there are income limits that will impact the tax deductibility of a traditional IRA, and Roth IRAs have income limits that affect the contributions you can make.

6. Plan for emergencies
It's not all good times, not even for the wealthy. So, as they're planning for the future, they anticipate the good times as well as the bad.

By planning for emergencies, the wealthy allow their highreturn investments to keep on working for them rather than having to sell when the market is potentially down.

Some wealthy people keep an emergency fund with several months' worth of expenses so that they don't need to tap their assets in tough times. Experts recommend six months of savings, and those funds can be stored in a high-yield savings account to help max out the return and minimize the opportunity cost of holding cash. Other wealthy folks build up cash-generating assets such as bonds and dividend stocks to be sure that income is always coming in, even if they aren't working.

7. Invest in yourself
One of the smartest investments the wealthy make is in their own skills. If you have an interest in a certain area, you can upgrade your skills, whether through courses or even professional schools, such as law school or business school. This investment has the potential to increase your future income and financial security, of course, but it can increase life satisfaction, too.

It can be easy to forget sometimes, but wealth is valuable because it can help you lead a more fulfilling life, not just buy more stuff. By investing in yourself, you can put wealth to work in perhaps the most valuable way.

Bottom line
Investing like the wealthy is available to many individuals, even if you're just starting out, and in many ways it's never been easier. The best online stockbrokers charge no commissions on stocks, and even the best investment funds charge incredibly low annual fees for investors.

Harv's Corner 12/09/2024

12/9/2024

Talking is critical to estate planning
By CHRIS FARRELL For the Minnesota Star Tribune

Life is unpredictable. While we can't predict the future, we can prepare for it. One crucial step towards securing your loved ones' well-being is creating a will. This legal document ensures your assets are distributed according to your wishes, minimizing potential conflict and providing peace of mind. Without one, your estate is subject to state intestacy laws, which may not align with your desires.

People listen when Warren Buffett talks money.

At age 94, the head of investment conglomerate Berkshire Hathaway is a legendary stock picker. His annual letters to shareholders are required reading among investors.

So it's little wonder a recent note to Berkshire Hathaway shareholders about his estate planning thoughts is gaining attention.
Buffett's letter offers insights into his approach to life, family and legacy.

The prompt for this letter: giving more than $1 billion in Berkshire Hathaway stock to a foundation named for his late first wife and to family foundations his three children lead. This estate-planning suggestion stood out.

"When your children are mature, have them read your will before you sign it," he wrote. "Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death."

His approach is a timely reminder for the rest of us:
Conversations with family and other beneficiaries are critical for crafting your will, your estate plan and your end-oflife wishes. A will tells your heirs how you want your assets and property distributed after death. A will encourages you to think about your legacy. Everyone benefits from estate-planning conversations.

"Over the years, I have had questions or commentary from all three of my children and have often adopted their suggestions," Buffett wrote.
Without taking the time to put together a will, state law dictates what happens. Yet multiple surveys show few people have an estate plan, let alone talked it through with beneficiaries.

A 2024 Caring.com survey reported only 32% of Americans have a will. A survey by the demographic consulting firm Age Wave and the financial service company Merrill Lynch from several years ago reported nearly half of Americans older than 55 have no will.

The call to personal finance action:
If you don't have a will, make an appointment with an estate planning lawyer, or for those with uncomplicated situations, use an online resource like Nolo's Quicken WillMaker & Trust. Second, start a conversation about your plans and desires with loved ones and field their feedback and input.

Your basic estate plan should include a will, a health care directive and durable power of attorney.

The holiday season is a time for gatherings of family, extended family and close friends. Why not start the conversation now and continue it into the new year? There is no time like the present.

Chris Farrell is senior economics contributor for "Marketplace" and a commentator for Minnesota Public Radio.