Financial Planners: Top 5 Tips for Struggling Clients Looking To Build Wealth

Are you determined to build wealth and feel like you’re doing everything right to do so? However, despite your efforts, you’re just not getting there. Perhaps you’re encumbered by rising living costs or not as smartly aligned with your spending habits as you should be. Whatever the case may be, there are steps you can take to improve your situation. 

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GOBankingRates consulted with financial planners to learn the top advice they give clients who are struggling to build wealth.

Put Plans in Place 

Often, people in the earlier stages of their financial journey need to know what to do to even get started. Here’s where you need some deep foundational work. 

“When I’m working with these clients, putting a plan in place is very important,” said Melissa Shaw, wealth management advisor at TIAA. “We want to look at the income coming in and going out each month, create a budget, automate their contributions and increases to their retirement accounts, save additional income in non-retirement accounts for investing, real estate or life insurance (depending on your needs) and ensure their investment risk is appropriate for their goals.”

Address Mental Barriers 

Even before embarking on a robust plan that includes budgeting and retirement contributions, it’s advised that you recognize and overcome any mental barriers or beliefs that may be barring you from building wealth. 

“I encourage my clients to be honest with themselves and with me about what actions they will or won’t take,” Shaw said. “If you aren’t going to try to live on a budget, why spend time creating one? We should focus on the other areas of building wealth. It’s also important to address their beliefs about money. One question that I ask every client is, ‘What is your philosophy on money?’ 

“This question provokes a variety of responses and really gives me a glimpse into my client’s beliefs and motivations,” Shaw said. “There are some clients who believe money is the root of all evil or they don’t feel deserving of wealth. Many others believe that money is security or independence. As an advisor, I have to know what this money means to my clients so that I can motivate them to take action.”

Wipe Out Debt 

Unfortunately, most Americans can relate to this one: debt. It’s the biggest roadblock to building wealth. 

“Debt is stealing from your future,” said Jay Zigmont, PhD, CFP, founder of Childfree Wealth. “Each debt you pay off is increasing your total net worth, and you are effectively getting a risk-free, tax-free return of the interest you would have paid. With credit cards now over 20% interest, paying them off is likely to be a better return than investing.”

Establish a Fixed Savings Amount That Is Non-Negotiable 

Hazel Secco, CFP, CDFA, president and founder at Align Financial Solutions LLC, sees many young professionals — even those with high incomes — struggling to build wealth due to high spending and the rising cost of living. 

“They often wonder how to build wealth while their expenses are so high,” Secco said. “My advice is to prioritize establishing a fixed savings amount that is non-negotiable. Once spending takes precedence, it becomes challenging to cut back and allocate funds toward saving. This is also a key component of behavioral financial coaching because clients must cultivate the habit of prioritizing saving and allocating funds before spending. This disciplined approach greatly enhances their success rate in achieving their financial goals.” 

Put the Wealth Puzzle Together 

Even already wealthy folks can be confused or concerned about building it. Shaw finds that those in the later stages of life or with a lot of assets, tend to focus on understanding their wealth and transferring those assets to future generations. 

“Just because a client has a lot of wealth doesn’t mean they understand it, know what to do with it or feel secure about their financial future,” Shaw said. “The questions from these clients are ‘I have all of these assets, now what do I do with them?’ and ‘How do I get this wealth to my heirs?’ For many, it is a puzzle that needs to be solved.”

How do you solve the puzzle? By categorizing your assets into three buckets: Now, Later, and Never. 

“The Now assets are generally non-retirement investment accounts, bank savings and real estate,” Shaw said. “These assets generally provide income earlier in retirement and are better to leave to individuals’ beneficiaries.

“The Later bucket is tax-deferred assets, like IRAs, 401ks or annuities,” Shaw said. “These assets are fully taxable, provide the majority of retirement income, and are generally better left to charitable organizations (who don’t have to worry about taxes).”

Lastly, the Never bucket consists of investments that grow tax-free, like Roth accounts, 529s and life insurance.

“These accounts are the best to leave to individual beneficiaries, from a tax perspective,” Shaw said.    

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This article originally appeared on Financial Planners: Top 5 Tips for Struggling Clients Looking To Build Wealth

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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