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If you're making six figures, and you still feel behind, this video's for you. I'm going to walk you through five money moves that high earners get wrong.
Transcript
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If you're making six figures, and you still feel behind, this video's for you. I'm going to walk you through five money moves that high earners get wrong. The first move is waiting too long to utilize a backdoor Roth. If you're making too much money, you can't contribute to a Roth IRA, but that doesn't mean that you're out of options.
You're just out of easy options. A backdoor Roth still allows you to get money into the account anyways, but here's the issue that a lot of high earners make. They wait until December, they rush the whole process, and then they combine old pre-tax IRA contributions with capital gains over time. And this creates a whole mess that they didn't need to create in the first place.
So, this is the key to it. Do it early, keep it clean, and keep the IRA as simple so that this whole process can be simple as well. Now, the second money move that I see at times is letting lifestyle creep outrun or outpace your savings rate. Every time your income goes up, your lifestyle quietly goes up with it as well.
This could be your new car, new house, new vacations, new travel. And there's nothing wrong with this, you've earned it. But if your saving rate isn't going up as well, you're actually not making much progress. You're just getting more expensive. The fix isn't to stop enjoying your money. The fix is to give every raise or every dollar a job before life does it for you.
Money move number three is ignoring tax bracket creep until it's too late. High earners think about taxes once a year, and that's usually in April. And by that point, it's usually too late. The moves that actually save you money, think like tax loss harvesting or charitably giving or retirement account sequencing, all of those really usually happen before December 31st.
Waiting until taxes in just means that you figured out how the year went, not changing how it goes. Move number four is overfunding your 401k and underfunding everything else. But if all your money is locked up in retirement accounts, you have no flexibility, no liquidity. If life happens to you and you have to pull money out before the age of 65, then you may be in trouble.
High earners need a mix. Retirement accounts, yes, but also brokerage accounts, cash reserves, money that you can actually use within your timeline, not the IRS timeline. Move number five that I see is treating income as if it's the same thing as wealth. This is a big one. A high income can shift overnight.
This could be with a layoff. This could be with a health scare. Or this could be a shift in an industry. So, the real question isn't about how much you're making, it's how much is still going to be there if the paychecks were to stop. Here's the thing, making a lot of money solves a lot of problems, but it creates a few new ones, too.
And most of those problems really don't have to do with how much money you're making. If you want help building a plan that actually matches the life that you're living for, that's exactly what I do. So, I would love to be able to have a conversation with you. Book a call and let's talk soon.
Thank you, and I pray you have a wonderful day.
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.
