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6 Lessons to Manage Money Like The World’s Most Successful People

Do more with what you’ve earned.

Financial advisors for successful professionals, executives, and business owners.

Takeaways:

  1. High earners have a unique set of financial considerations that set them apart.
  2. The highest income won’t make up for a lack of strategic savings.
  3. Buying through bear markets while focusing on small-cap and value stocks is a way to set your investment strategy apart.
  4. Effective tax planning is key to retaining as much of your pre-tax earnings and gains as possible. 
  5. Early investments alongside long-term holding can capture the best upside over a sufficiently long period.
  6. If you’re overwhelmed, don’t be afraid to delegate. 


Though investing is more accessible than ever, many traders find themselves underperforming market indices in all but a few niche cases. Worse yet, we often see amateur stock jockeys with little to show for years of trading compared to what they’d have if they stuck with tried-and-true, boring investment methods. That’s a crisis when you reach or near retirement age.

But if you’re reading this, it isn’t too late. Taking control of your financial future through prudent, common-sense investment and wealth management strategies is the primary way to build long-lasting, generational wealth while positioning yourself for a fruitful (or early!) retirement.

Chances are that you’re also a high-income professional if you stumbled upon this article. In that case, there are unique and niche considerations to address that you might not expect – including those we’ll cover below.

1. Savings Beats Earnings: Saving for Long-term Value

Lifestyle inflation describes the all-too-common theme where spending levels rise to match our income, leaving a limited margin for savings or investment growth. Lifestyle inflation is one of the top roadblocks standing in your way to long-term financial stability. 

But, while we all know lifestyle inflation exists, acting on that knowledge is a different matter. The trend holds particularly true if:

  • You’re relatively young and work in a high-paying industry like tech. Many young earners struggle with the sudden income spike when they leave academia and enter the workforce. 
  • Your work/life balance (or lack thereof) means you often trade money for time in your personal life, i.e., ordering food rather than meal prepping. 
  • You live in a high-cost-of-living (HCOL) area. HCOL residency tends to be the top factor in lifestyle creep and one that takes extra diligence to protect against. 

Budgets are Bad?

The go-to conventional wisdom when facing lifestyle inflation is to “make a budget.” But, generally, fighting lifestyle creep with budgeting doesn’t work. We’re all human, and human psychology is tricky. For many, restricting anything acts as a pressure cooker, building momentum to spectacular excess that negates all the hard work.

Add “revenge spending,” or an urge to spend money to make up for lost time spent budgeting, into the mix, and budgeting can end up harming your bottom line more than just letting lifestyle inflation run its course. 

A More Balanced Approach – Put Savings First

Instead of restricting yourself to burdensome budgets, an alternate approach to managing lifestyle creep is properly allocating your earnings before you spend in a way that scales alongside your career trajectory. 

If that sounds suspiciously like budgeting, it isn’t – instead of putting a cap on specific expenses, we prioritize certain allocations first and then spend the rest to our heart’s content:

  • 50% towards needs – mortgage or rent, car note, insurance, all the non-negotiable expenses. 
  • 20% towards savings – this includes after-tax retirement accounts, personal taxable brokerages, standard savings accounts, and more – basically anything that grows your wealth over time.
  • 30% to whatever else – this is where you enjoy the fruits of your labor and spend on whatever items or activities help you enjoy life more. 

The benefit of this compared to budgeting is that it puts savings first. The average American savings rate is, frankly, abysmal. We should target at least 20% per our above allocation, but today, it sits below 4%. 

Financial independence hinges on saving today to enjoy tomorrow – that’s a plain truth. No matter how much you earn, spending it on depreciating assets or activities without first socking away a portion toward savings is a one-way trip to deferred retirement, at best. 

What Now?

The first step toward managing lifestyle creep and building a healthy savings strategy is understanding how much money comes in and where it goes. You can use this free tool to get started. Once you have an idea of money coming in and out, you can prioritize a savings allocation to get started on a path to long-term financial independence. 

2. Just Keep Buying

When you’re in the middle of a bear market or even mild trading turbulence, it’s easy to feel like the world is ending. We’re humans, driven by human psychology. Bearish despair is why so many sold stocks as fast as possible during the 2008 Great Recession, why many missed the boat on stocks skyrocketing throughout the early pandemic, and why many sat on the sidelines throughout 2023, missing out on more than 25% gains in the S&P 500. 

But what actually bore out?

As devastating as it may feel while we’re in its grip, bear markets are historically no big deal when you zoom out. Average bull markets last more than four times longer than the average bear period, and strong market gains more than offset temporary pullbacks or losses (before accounting for dollar-cost averaging throughout a bearish period!). 

If you exhibit two of the biggest fear-based behaviors – selling as stocks fall or sitting on the sideline waiting for a “clear sign” of reversal – you often miss out on the biggest investment opportunities. Instead, just keep buying. 

The old “be greedy when others are fearful” maxim drives this investment ethos because it helps us understand that, barring a true economic collapse, short-term fluctuation is nothing in light of long-term momentum and opportunity. If you want above-average portfolio gains, you’ll need to feel comfortable stomaching volatility along the way. 

This is, of course, why many choose to outsource their investment strategy and portfolio management to professionals, as they tend to have the foresight and objectivity (not to mention fiduciary duty) to hold steady while others bail.

3. Get Ahead of Taxes

Death and taxes – you know the saying. But many high earners, especially those with newfound or first-generation wealth, tend to underestimate tax impacts on their bottom line. This holds doubly true once you break beyond basic W2 filing; common and exotic investments, unique compensation structures, and entrepreneurial earnings all combine to create a massive tax burden that, for many, is their single largest annual expense. 

The biggest mistake most make when pivoting from self-filed W2s with (maybe) a handful of standard stock transactions to larger, complex tax situations is mistaking tax preparation with tax advising. But the difference is huge – whereas a tax preparer helps collect, optimize, and send your annual return to the IRS, an advisor helps strategically plan and manage future tax considerations. 

But a tax advisor is as key to your overall wealth and investment strategy as a financial planner. 

While still somewhat uncommon, some financial planners also develop direct ties with tax planners and CPA firms to reduce friction when it comes to linking wealth management with effective tax advising. In either case, your financial and tax planners should be happy to interact and work with one another, even if not affiliated – if either party balks at the other, consider it a major red flag. 

Tax Planning Considerations

Ultimately, a tax plan is as tailored to your personal circumstances as your financial plan is and includes:

  1. Current and expected income, including source (salary, contract work, stock-based compensation).
  2. How you foresee your income fluctuating over time – this is where the financial planner/tax advisor relationship is key, as your future (retirement) income plans drive today’s investment strategies, expected withdrawal windows, and more. 
  3. What major events you foresee on the horizon, like home ownership. Like income fluctuations, tax and financial planners work together to forecast these events and ensure you can afford the expense while minimizing the impact of taxes (like selling vested shares for a down payment). 

Your financial planner or wealth manager’s touted returns are great – but what matters to your bottom line is your after-tax returns, not the stat on a spreadsheet. That’s why tying a tax planner into the conversation early and often is key. 

Financial planning that matches your ambition.

Financial advisors for successful professionals, executives, and business owners.

Strategic Tax Management

As we said, tax planning is nuanced and driven by personal circumstances. Still, a handful of common “best practices” are easily executed today, with minimal effort:

Tax-Loss Harvesting

Best executed in a taxable brokerage account (the strategy is counterproductive, at best, in a tax-deferred retirement account), tax-loss harvesting is the timed selling of stocks or assets at a loss to offset gains from other stock sales. Common tax-loss harvesting windows tend to cluster toward the end of the year. 

If you have no gains to offset, note that you can lower your income by up to $3,000 by realizing losses. Any amount beyond the initial $3,000 loss cannot be used for the same tax year, though you can carry the remainder forward.  

You can learn more about tax-loss harvesting here

ETF Investing

Using ETFs has more tax benefits than their utility in tax-loss harvesting. Many ETFs passively track an index or market benchmark, like QQQ (NASDAQ-100 ETF) or SPY (S&P 500 ETF). To hold all the stocks in the S&P 500 or NASDAQ-100 and have them perform like their benchmarks, you’d need to buy each of the stocks within the index and constantly tweak them by selling or buying to maintain the respective weights. 

By comparison, ETFs rebalance for you without triggering tax events in your portfolio. The mechanisms behind the process are complex but involve bunding and disassembling components (individual stocks) from the ETF shares; likewise, since ETF owners are buying and selling ETF shares between themselves (rather than individual companies comprising the ETF), there are fewer taxable events associated with “selling the index” as an ETF rather than solo shares. 

1099 Management

If you’re a contractor or have a 1099-designated side hustle, you may be able to write off substantial work expenses to bring income tax levels down. You may also be eligible to open additional pre-tax retirement accounts, like a SEP IRA, in addition to your employment 401(k) and self-directed traditional or Roth IRA. These contributions can also help reduce your taxable income while building greater wealth for retirement. Rules surrounding both can be tricky, so consult a tax professional before committing to either course of action. 

Defer Income

If you’re due a large bonus or similar unexpected income boost, you may want to speak with your employer about deferring the payment until the following year. This, too, is a tricky situation as you may find yourself in a higher bracket the following year – but it serves the purpose of reducing your tax burden for the time being. 

4. Deep Diversification

The holy grail of investing is finding a perfectly diversified mix of uncorrelated stocks and bonds. It’s what drives most major buy-and-hold investment strategies and helps protect against short-term downside while capturing long-term gains.

Though your specific mix will shift and change as you age and capital preservation begins outweighing capital growth, diversified portfolios generally include some blend of:

  • US, developed international, and emerging market stocks. 
  • Sovereign entity (government) bonds, inflation-protected bonds, municipal bonds, and corporate bonds (all of varying duration).
  • Niche asset classes like commodity ETFs, REITs, and structured notes.

What we often see, though, is new clients coming to us with an overconcentration to just a few specific stocks – even if they feel as though they’re diversified, chances are they aren’t. While picking individual stocks is fun and, with enough research and a little luck, can be rewarding, we often see new clients overemphasize specific stocks that are already represented by index holdings in the same portfolio. 

For example, one client had a substantial Nvidia position in addition to his sizable S&P 500 ETF allocation – between the two, Nvidia was nearly 50% of this portfolio’s worth! That tendency exposes investors to too much specific risk and can prove catastrophic, even if it has worked out in his favor thus far. 

Bottom line – Spreading your investments across a range of individual stocks and index ETFs without due diligence isn’t a diversification strategy; in many cases, you may expose yourself to specific risks that diversification is designed to avoid. Instead, look to diversify across asset classes, not single stocks.

5. Today’s Small-Cap is Tomorrow’s Top Stock (But Value Matters Too!)

If someone promises a surefire way to beat any major market index, they likely have some underlying motive or questionable asset class to hawk. Over time, a broad-based index investing strategy outperforms most active investment alternatives, including the performance of many hedge funds. 

But there’s a strategy that, over a sufficiently long period, does outperform S&P 500 or similar large-cap index investing: small-caps. Small cap describes companies with a small market capitalization, generally defined as sub-$2 billion (though there’s some variance depending on who you ask). 

From a common-sense perspective, the thesis is clear: your mega-caps like Meta ($1.2 trillion market cap), Amazon ($1.76 trillion), and Apple ($2.9 trillion) didn’t jump on the scene with massive valuation. 

Instead, they started where 99% of public equities do: as a small-cap struggling to survive before they exploded upward. Today’s small caps are tomorrow’s Magnificent Seven, and early investment coupled with long-term holding is the best way to capture upside over a sufficiently long horizon. 

Of course, throwing cash at a bunch of small caps and hoping something sticks isn’t prudent, wise, or effective. You’ll still need a minimum set of standards to make an investment worth considering, and we’ve found that value stocks tend to offer the most bang for your buck. Value stocks describe those that, from a financial and fundamental perspective, are materially undervalued using proprietary modeling and forecasting techniques.

6. Delegate Complexity 

If you’re overwhelmed, don’t be. Though meme stocks, stock trading accessibility, and constant financial fluff news make it seem as though you’re missing out by not “playing the market” yourself daily, that’s why experts exist. You have enough on your plate, and delegating financial complexity offloads some complexity associated with actively managing your financial life from budgeting, retirement accounts, taxable brokerages, tax planning, estate planning, and more – all drag on your time and energy. 

What’s more, missteps in some areas can have material adverse effects on your life, from having to work through retirement to massive IRS fines if you mislabel or mismanage certain retirement account aspects. The right professionals, on the other hand, have a fiduciary duty to act in your best interest and the expertise to know what that best interest is.

As you earn more, complexity only increases – especially if you work on a contractual basis or have a unique stock-based compensation structure. Likewise, you probably intend to earn more as you age and grow in your career, and greater net worth comes with greater complexity. That’s why, even if you feel as though a financial professional is a bridge too far today, building a relationship now will pay dividends down the line. The best financial planners meet you where you are today and help you plan for tomorrow by learning your hopes, dreams, ambitions, and more – then building a roadmap to achieve them. 

Bull Oak is an advisory firm that specializes in financial planning and investment management for high-income professionals and business owners. We wrote this guide because this is exactly what we love to nerd out about. Our reviews speak for themselves

If you’re in a place to delegate the complexity of your financial life, we’d be happy to see if we can help. Schedule a call with a financial advisor here.

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