5 Biggest Mistakes of High Wage Earners

With more than 50 percent of our clients with incomes in excess of $100,000, we have developed strategies for high income earners. These individuals and couples have specific needs and challenges when it comes to working toward financial independence. They often have a false sense of security that leads them to decisions that adversely affect their ability to create wealth.

  • The Gravy Train Will Continue. There are many factors that can cause you to lose your paycheck. At some point, the organization will downsize, merge, or implement cost cutting measures in which they eliminate, consolidate or farm out your function. Or you can simply fall out of favor with the management. The worst possible thing is to be unprepared for the day when you lose your source of employment—even temporarily. Herman S. Cage & Associates helps clients to develop a survival strategy that includes cultivating multiple income streams, managing your resources wisely and exploring options. Astute financial planning means more than simply setting aside the typical “6 months” expenses.
  • I Can Do It Myself. High wage earners are of exceptional intelligence and extremely skilled at what they do. However, one of the biggest mistakes that they make is assuming that those specialized skills translate into financial management expertise. Researching investments on the internet. Taking a class or two. Buying stocks on e-trade sites. Making payments into your 401K. These are not investment strategies. Herman S. Cage & Associates will develop a financial plan that minimizes your tax liability and maximize your wealth with an eye toward real goals. Individuals who don’t utilize experts to manage their financial resources are short-changing themselves. Literally.
  • I Have a Financial Planner. Maybe you do. And maybe you don’t. Chances are the latter. A banker is not a financial planner. A stock broker is not a financial planner. Neither is an insurance agent. All of these are individuals who place orders for products that their organization sells. As financial planners, Herman S. Cage & Associates takes a look at clients’ overall financial situation and goals and then presents a comprehensive plan to support long-term goals and objectives.
  • My Investments Are Doing Well. Says who? The stock broker who sold them to you. A critical component of Herman S. Cage & Associates’ services is developing benchmarks for evaluating current investment performance. This enables you to make sure they are meeting expectations and supporting overall financial goals. Some factors to consider are the tax impact, opportunity costs, actual gains versus paper gains and loss of liquidity.
  • Living At or Above Your Means. Unfortunately, the more we make, the more we tend to spend. The biggest mistake high wage income earners make is lack of will power. Herman S. Cage & Associates develops a workable balance that enables clients to enjoy some fruits of their labor while consuming under their means. We help calculate your fixed costs, distinguish wants from needs and establish priorities for variable expenditures so that you set aside resources to build assets and wealth.


Choosing a Financial Planner

Choosing a financial planner is one of the most important decisions you will make in your lifetime, affecting everything from your children’s education to your retirement. Here are some guidelines to keep in mind.

Is the company reputable?
Do your due diligence. The internet is a good starting point. See what kind of reputation they have. What are people who used their services saying about them? Are there any lawsuits or administrative actions again the firms or the individual? You should also ask for references.

Who will you work with?
A company with a solid reputation is important. But more importantly than a well known name or a catchy marketing campaign is the experience and knowledge of the person that will be handling your financial planning. Know who will be your planner and ask the following questions.

What training and accreditation does your financial planner have?
Find out about their education, training and accreditation. Things to consider are advanced degrees, business and finance background, certifications and accreditations.

Does he/she understand your tax situation?
Expertise in tax code and tax strategies is essential. Once your financial goals are articulated, a financial planner should be able to recommend simple, straightforward techniques that reduce your tax burden.

Does he/she have practical experience?
To recommend the best strategies, a financial planner must have practical experience as well as theoretical knowledge. A good financial planner should bring life perspectives and an abundance of experience with a broad range of investments and techniques—not just the products that his/her firm sells.

What is his/her overall investment philosophy?
Is it high yield? Is it to protect principal and provide a reasonable return? Is it short-term gains or a long-term plan? Make sure his/her philosophy is compatible with yours.

Can he/she provide independent, unbiased advice?
Make sure that there are no “hidden” agendas. Understand what it is that the financial planner is selling. A financial planner should do just that—develop a financial plan—not just recommend the stock of the day or financial instruments that the company sells. For example, if you’re a young couple starting out in life, you may be better off putting away that $100 per month in a savings account than investing it in a “hot” mutual fund. The “hot” mutual fund may or may not fit your needs. If it doesn’t, you want a financial planner that has the integrity to recommend solutions that do.

Does he/she share your values?
A financial planner should have values that are compatible with yours. Figure out your values and make sure that the financial planner reflects the ones that resonate with you. Success is more unlikely with a financial planner who reflects values that are foreign to you.

Do you trust him/her?
It is important to trust a financial planner. He/she will know the intimate details of your finances, recommend strategies, coach you, and hold you accountable. If you don’t trust him or her, then you will be hesitant to carry out the plan. Be aware of their core values, what they purport to represent.

What is the fee?
You don’t want any surprises when it comes to fees. Find out how much you will pay and how the financial planner is compensated. Is it an hourly fee? Is his/her compensation tied to a commission? If that is the case, then he/she may not be a financial planner, but someone who sell financial products such as an investment banker or insurance broker.