5 Essential Steps After Hitting $1M Net Worth

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Achieving a net worth of $1 million is a significant marker of financial success. While some envision this milestone through windfalls or fortunate events, many hardworking individuals earn this by making smart decisions over time. Yet, reaching this goal prompts the question: What do you do next?

If your financial journey is leading you towards amassing one million, considering strategic next steps can sustain and even grow your wealth. Here are five recommendations for what to focus on when your net worth hits that magical $1 million mark.

Comprehend the Composition of Your Wealth

Kerry Keihn, a financial advisor with Earth Equity Advisors, emphasizes the significance of understanding the components of your net worth. “Is most of it in home equity, investments, or cash?” Keihn asks. True financial health isn’t merely about numbers; it’s crucial to align your assets with your financial objectives. For example, if your wealth mainly consists of cash, it’s wise to verify that you’re within FDIC insurance limits.

Invest With Intent and Values

When you achieve such an impressive milestone, it presents an opportunity to align investments with your ethics. According to Keihn, “Investors frequently choose strategies that reflect their principles through sustainable, responsible investments,” as reported by the US SIF Trends Report. This involves choosing companies with sound environmental practices, possibly excluding sectors that conflict with personal values. It’s crucial to ask if your investments contribute to the kind of future you support.

Recognize the Pitfalls of Anchoring Bias

Keihn describes anchoring bias as the tendency to heavily rely on initial information. Many people still view $1 million as the pinnacle of financial success without considering inflation. However, the true impact of holding a million-dollar net worth today depends on individual financial needs. The key is to ensure your portfolio is aligned with your goals, not perceived benchmarks.

Handle Taxes and Withdrawals Wisely

As your portfolio grows, tax efficiency becomes crucial. Keihn recommends tax-smart tactics like asset location and tax-loss harvesting. Charitable donations through donor-advised funds can also enhance tax efficiency. And if drawing from your investments, sustainable withdrawal rates are vital for preserving wealth.

Review Your Financial Strategy Regularly

With significant wealth, it’s an ideal moment to evaluate your financial strategy. “After reaching $1 million, reassess whether your plan aligns with your future goals,” Keihn advises. Whether your aim is financial independence or another milestone, now is the time to adjust or create a formal plan.

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