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Most high-earners are great at making money, but terrible at organizing it. And that gap is costing more than what they realize.
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Most high-earners are great at making money, but terrible at organizing it. And that gap is costing more than what they realize. Hi, I'm Prince Chenou, founder of PLC Wealth Partners. I'm a certified financial planner and chartered financial consultant. And I work with first-generation high-earning professionals and business owners who are making great income, but never had a plan for what to actually do with it.
Today, I want to walk you through five accounts that if you're a high-earner, that you need to have working for you. Not sometime in the future, but right now. Let's start with the most basic one. And this is one that many people skip because they feel like it's boring. But this is your high-yield savings account, otherwise known as a emergency fund.
This is the money set aside outside of your checking account that covers three to six months of your essential expenses. Not to lifestyle, but your expenses. This include things like your rent or your mortgage, utilities, insurance, groceries, the stuff that has to keep going even whenever your income stops. Here's why it matters more for high incomes than most people think.
The bigger your income, the bigger your lifestyle usually gets. The bigger your monthly obligations also get. If you're not intentional, your emergency fund target creeps up right along as your spending, and you end up underfunding without realizing it. Here's also a quick tip. Don't let the money sit in just a checking account earning north of nothing.
Put it in a high-yield savings account where actually it's earning a competitive rate while it's sitting waiting whenever it's needed. Everything else that we're going to talk about today only works if this piece is solid first. Account number two is an employer retirement plan. This could be your 401k or your 403b. This is the account that your company sponsors to help you save for retirement.
Usually, with contributions coming straight from your paycheck before you even see the money. Simple enough, but here's the piece that gets left out on the table consistently. And this is the employer match. If your company matches your percentage of what you contribute, and you're not contributing enough for the full match, you're essentially walking past free money.
And I mean this literally. It is compensation that you've already earned, and you're just choosing not to collect it per se. So, for a high earner, that could be thousands of dollars a year, every year, compounding for decades. So, I would say at minimum, your first move should be to contribute enough to capture the entire match.
After that, you can talk about how much more you want to make based on your goals, your tax situation, or whatever else you're funding. But, that match comes first. Account number three is where you get more specific for high earners, the Roth IRA, or for many, the backdoor Roth. A Roth IRA lets your money grow tax-free, and whenever you withdraw in retirement, you don't owe a dime in taxes on it.
This is a incredibly powerful tool, especially if you believe taxes are going to be higher over time, or if you simply want tax-free income to lean on later. But, here's the catch. There are specific income limits on who can contribute directly into a Roth IRA, and a lot of high earners would completely blow past that limit.
If that's you, you're not out of luck, you just need a different plan to get in. And this is where a backdoor Roth comes into play. It's a legal, well-established strategy where you can contribute to a traditional IRA, then convert those funds to a Roth IRA at a later date. The direct route is closed to you, which is a Roth IRA, but the backdoor route isn't, and most people making six figures or more simply don't know this exists.
And no fault of their own, this is just a gap in guidance, not a gap in opportunity. Account number four might be the most underrated account in personal finance. This is the health savings account, or HSA for short. If you have a high deductible health plan, you're likely eligible, and this account deserves your attention because it does something that no other account does.
It gives you three tax advantages. The contribution goes in tax-free, the money grows tax-free, and then you if you use it for qualified medical expenses, you can take it out tax-free as well. Three tax breaks on the same dollar. No other thing in the tax code works quite like this. A lot of people treat the HSA like a glorified checking account for any doctor visits or prescription, and no fault to them.
But, if you could afford to pay for medical expenses out of pocket right now and let your HSA balance to grow. You're building a resource that can then quietly become one of the most effective parts of your retirement plan. Now, account five is your taxable brokerage account. This is the one that gives you room to breathe.
Unlike your retirement account, there's no contribution limit here, no income restriction, and no penalty for accessing your money before a certain age. You can invest as much as you want, wherever you want, and use it however you want to. For higher earners, this is the flexibility. Once you've captured your match, funded your Roth or your backdoor Roth, maxed out your HSA, this is the kind of account that lets you keep building wealth without the government telling you when or how you're allowed to use it.
Yes, you pay taxes on the growth, but you're trading a bit of tax efficiency for total freedom. That trade-off is worth understanding and worth using intentionally. So, that's why that's on the list. Now, let's recap real quickly. A high-yield savings account for protection, your 401k or 403b for the match, a Roth or backdoor Roth for tax-free growth, an HSA for the best tax treatment available, and a taxable brokerage account for flexibility.
Individually, each two of these accounts does one great job, but together they form a system, and that system is what turns a high income into real lasting wealth. The goal was never just to earn income, it was to build something with what you earn, with purpose and with intention. If you want help putting a system like this together for your own situation, that's like what I do here at PLC Wealth Partners.
Please reach out below for more information. Thank you.
This video is for general educational purposes only and is not personalized investment, tax, or legal advice. Every situation is different. Talk with a qualified professional about your circumstances before acting. PLC Wealth Partners is a registered investment adviser. See our disclosures.
