Secrets for changing high income into high wealth

It feels good to have a lot of money flowing into your bank account every month. Having a high income, however, doesn’t guarantee you’ll automatically create a high net worth. Here are several secrets to help change your high income into a high net worth.

• Always pay off your credit cards. Interest you pay on credit card balances helps a bank to grow its wealth, not yours. If you pay off your credit card balances every month, your income that would have gone toward interest payments is instead now going right back to you.

• Plan your major purchases. For your next major purchase, such as a vehicle, house, boat, or that vacation of a lifetime, consider planning well ahead before going through with the transaction, for example maybe several months or perhaps a year or longer. Giving yourself plenty of time will help you to save if you don’t already have the money set aside. It can also give you the opportunity to think through whether or not you truly want whatever it is you’re about to buy.

• Always save. Even if you do end up going through with your major purchase, continue setting aside money without ever taking a break. This will help you to both develop and maintain a saving and investing habit, even when you end up depleting some of your savings with a major purchase.

• Leave your principal untouched. If you invest $1,000 today, do your best to never withdraw some or all of that initial $1,000 investment. Instead try to live on only the interest or dividend income that’s generated by your $1,000 investment. In addition to never running out of money, the other benefit of never touching your principal investment is future appreciation. For example if this $1,000 investment represents 100 shares of Company XYZ, the same 100 shares in 20 or 30 years may be worth $2,000, $3,000, or more.

• Understand your tax situation. Do you know how much your tax bill will be if you start taking money out of a bank or brokerage account? What about if you sell an asset that has appreciated in value? Take stock of your current situation so that when the time comes to start cashing out your investments or retirement accounts, you can be as tax efficient as possible.

One of my primary objectives is to help you achieve your financial goals through a holistic approach that is tax-efficient in my wealth management and tax resolution practice. For more information, visit www.fredtfoxiii.com.

Fred T. Fox III is a Lawton native who owns his own business.