Financial Impact with Holly Morphew, AFC® Financial Coach

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Unique Challenges High Earners Face

Unique Challenges High Earners Face

Being a high earner does not mean the absence of financial stress. In fact, more often than not, more money comes with more financial stress.

More money in your life can mean more decisions, more energy to earn it, more people asking you for money, and the uncertainty that you are doing the “right thing” with your money.

As a culture, we place a high value on earning and spending money, and very little value on managing money. However, the way you manage your money makes the difference between becoming wealthy or not, regardless of how much you make.

Every day you are either creating wealth or not. It does not matter how much money you make. What matters is how much you keep, and what you do with what you keep.  

A $200,000/year earner can become penniless, just as $50,000/year earner can become a millionaire. The difference here is that the $50k earner had a plan, strategy, or system.

Below are five unique challenges high earners face, how to meet them head on to create wealth, and how to implement a system that works for you.

1. You are good at making money but not managing it.

It’s one thing to make money. It’s a whole separate thing to manage it. It’s likely you were taught to go to school, get loans, and get a job. Well, there’s a final step, and that is to manage the money you are now earning.

Manage it well and you will create wealth.  

The first step to managing your money well is to follow the platinum rule: send your dollars to assets every month no matter what. This is also known as paying yourself first.

2. You have cash flow but no assets.

If you get a paycheck, it’s time to set up some assets. Assets are defined as “a useful or valuable thing.” In your case, it means savings accounts, retirement accounts, real estate, and investment accounts.

Regardless of what is happening in your career, contributing to your assets ensures you are taking care of you, every time you get paid.

Check out my resources page or for information on these accounts, latest rates, and product offerings.

Growing assets over time equals financial security.

3. You don’t know where your money is going.

With your assets set up, it’s time to get a handle on where your money is going.

Add up what you spent on food last month. Then add up what you spent on anything other than bills. What does that amount to? Where can you trim spending so you can allocate more to your assets?

Use a spending tracker, or a financial wellness tool, such as to track your actual spending each month. Decide on a food budget and a spending budget and check in daily to make sure you’re on track.

As long as you stay within your spending budgets, and transfers to your assets are on autopilot, you’re on track for wealth creation.

Wealth means more choices. More choices mean freedom.

4. You are paying too much in taxes.

Next, it’s time to address your taxes. As a high earner, you pay more taxes simply because you are in a higher tax bracket. While that can’t be avoided, there are things you can do to reduce the taxes you pay.

Open an Individual Retirement Account (IRA). This is a retirement account you can take with you wherever you go. With a traditional IRA, your contributions lower your taxable income, which is a great first step to saving on taxes.

Alternatively, one of my favorite retirement vehicles is the Roth IRA. This allows you to contribute post-tax income to your retirement account today, and make withdrawals in retirement tax-free. That doesn’t help you now, but it does help you when you retire in a higher tax bracket and all the contributions you’ve made over your lifetime have been compounding, and you can make tax-free withdrawals.

But, for high earners, the income limit for contributing the maximum to a Roth IRA is $122,000/year for singles and $193,000/year for couples. That means that if you earn more than that, your contributions will be reduced. If you earn more than $137,000 ($203,000 couples) you cannot contribute at all. If this is you, open a traditional IRA instead.

Other ways to save on taxes? Buy a home. Mortgage interest is tax-deductible. Start a home-based or online business. What hobby, skill, resource, or interest can you monetize for 2-5 hours a week to reap the tax benefits of owning a business?

5. You don’t have a plan, strategy, or system.

All of the above gets you an A+. One is a good start. The more you add the better (and easier) building wealth becomes. Just like advancing in your career required coaching, systems, planning, and strategy, so does your money.

Your money plan should take into account where you want to be in 1 year, 5 years, 10 years, and on. It should be evaluated each month as your income and expenses, dreams and desires, ebb and flow.

Focus on what you do with the money you are already making and already spending, and redirect your dollars to their highest and best use.

When I say, “your dollars,” I mean ALL of them. Every dollar you earn needs a label. In other words, your dollars must be allocated to something before you get them. Your checking account should go to zero each month in theory. It won’t because of periodic expenses, but you get the idea.

What is the highest and best use of your dollars? That’s always going to be to pay down non-performing debt (credit cards) and build your assets (savings, retirement, investments). The next best use of your dollars is for things that bring you joy. If what your money is spent on will end up in the garbage tomorrow, make a different choice.

In closing

Wealth is for everyone. There is an abundance of good in the world. There is enough money, resources, and love. We just need to share it. Share your love. Share your money. Share your resources. Money is a flow. Giving and receiving must be practiced by everyone. Are you receiving? Probably not. It is your responsibility to receive. It’s a new era. Be kind to yourself. Open the channel to receive. We need you to. Open your heart. We want to give to you. Choose to see that. You are worthy. All are worthy. Share that. Give kindness. Take care of yourself. Make a financial plan. Your wealth matters. We can save the world one person at a time. You are that one person. Wealth is for everyone. Create it for yourself. Then teach someone how to teach someone to create wealth. !!!!

author avatar
Holly Morphew AFC®, Award–winning financial coach, author, global speaker, and multi-generational entrepreneur
Holly’s own journey to eliminating $67k in debt in her twenties, reaching financial independence in her thirties, and creating 11 streams of income are what inspire her to help others live their wealthy life.
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