Earning a high income is a blessing, but when ineffectively managed, can keep you in the category of “HENRY” (high earner; not rich yet). If you want to build long-term wealth, consider the tips below.
AVOID LIFESTYLE CREEP
Having a budget is critical to helping you avoid lifestyle creep (the increase of spending as your earning increases). Planning where you’ll allocate any expected income increases and setting up automatic contributions is helpful as well, so as not to have it sitting in your checking account. A good rule of thumb is to save 75% of any income increases.
PAY DOWN HIGH-INTEREST DEBT
Got a signing bonus? Tax refund? Raise? Great! Use any “extra money” to pay a chunk of your high-interest debt, and make extra payments on those loans whenever possible.
Consider contributing maximums to several different tax-advantaged accounts, allocating a portion of your portfolio to long-term investments that have lower capital gains taxes, and for those who own their practice, taking all applicable deductions.