I'm a financial planner, and my high-earning clients have 3 habits in common that help them build wealth

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Income generation is obviously a primary driver for wealth accumulation over time, but the real key is not how much you make — it’s the amount you are able to actually keep and ultimately use to meet specific financial goals. 

After providing guidance to them within their financial planning, here are three habits that my high-earning clients have in common.

1. Always evaluating where (and how) they can save more money

Throughout my discussions with clients, I have noticed that we are consistently discussing various saving/investing options, whether funds come from some type of cash windfall or higher monthly cash flow. These options can range from allocating money to emergency reserves, healthcare savings, retirement accounts, college funding, and brokerage accounts

Each client has a unique financial situation, but the habit in common is always asking the question, “Where is there an opportunity to save/invest and grow my assets?” 

2. Making sure they understand how taxation impacts their financial decisions

Taxation has some level of impact on virtually all financial planning topics (college funding, insurance, investments, retirement, estate planning, executive compensation, etc.) so I notice that clients often ask questions about tax efficiency. 

I am not a tax professional and never claim to be, but as a certified financial planner, it is still my responsibility to at least address certain tax implications across clients’ financial plans. Clients are aware that not addressing tax issues can negatively impact progress towards their goals, so I am glad they are open to these types of discussions. It is great to know that my clients have this type of awareness.

Here’s an example of the type of conversation I might have about taxes with a high-earning client.

John works at a company that offers its employees a 401(k) retirement plan that also allows Roth 401(k) contributions. He is not completely sure about the tax implications of each type of retirement account, but knows there is a difference between the two options and decides to ask his financial planner, who explains it to him. 

The difference is when taxes are paid. A person can make pre-tax contributions to a traditional 401(k), which grows tax-deferred until withdrawn (taxes are paid at withdrawal, which is generally in retirement). Roth 401(k)s operate the other way around, meaning there is no tax deduction with contributions (these accounts are funded with after-tax money), but withdrawals in retirement are generally tax-free. 

He and his financial planner have the discussion each year regarding how much to save to the traditional 401(k) and/or Roth 401(k), and John looks forward to these conversations. Although his financial planner keeps notes and a calendar to address tax planning anyway, John still maintains the habit of asking these beneficial tax questions and an eagerness to learn.

3. Keeping their financial lives organized

Many times, clients come to me with some level of financial disorganization, whether it be not keeping all financial records in one place or even worse, not knowing exactly what they actually own. Getting organized is an integral part of the financial planning process. Once they have financial organization, I notice that clients maintain this effort. 

This is very helpful to me as a planner, but even more importantly, it is most beneficial to them. This habit of keeping all items in their financial life together (sometimes it can simply be through the usage of financial planning software and a secure electronic document vault) makes the planning process more efficient and provides flexibility for quicker planning adjustments when necessary.

Martin A. Scott, CFP, is the founder and financial planner of Lasting Wealth Principles, a fee-only comprehensive financial planning firm.

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