5 Financial Habits High-Income Earners Nail (And How You Can Too)

Five Essential Habits for High-Income Earners: Maximize Your Financial Success

In this episode of the Retire Early Retire Now podcast, host Hunter Kelly, a certified financial planner and owner of Palm Valley Wealth Management, discusses five critical habits that high-income earners should adopt to achieve financial freedom and reduce stress. He emphasizes leveraging income to accelerate savings, making intentional lifestyle decisions, maintaining strong financial communication with a spouse, minimizing consumer debt, and surrounding oneself with financial experts. Current tax legislation and its implications are also briefly touched upon. Hunter provides actionable insights on automating savings, budgeting effectively, and building a solid financial plan to enable early retirement and financial independence.

00:00 Introduction to Financial Freedom

01:31 Current Events: Tax Bill Updates

02:51 Habit 1: Leveraging Income for Savings

07:54 Habit 2: Intentional Lifestyle Decisions

11:10 Habit 3: Communication with Spouse

14:14 Habit 4: Minimizing Consumer Debt

16:39 Habit 5: Surrounding Yourself with Experts

18:32 Conclusion and Final Thoughts

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Transcript

0:00

welcome back to The Retire Early Retire Now podcast, the show where we dive deep into financial strategies that help high income earners achieve. Financial freedom sooner, live better, and take full control of their retirement. I'm your host, hunter Kelly, certified financial planner and owner of Palm Valley Wealth Management. And today we're gonna talk about five habits that every high income earner should have prepping for this podcast. We're trying to find different ideas to. Come up with valuable ideas and valuable topics to talk about to you guys. I went through my list of clients, who are the high income earners and which ones are doing the best, and what are the five habits that these guys and gals do really, really well. And so I've come up with. five habits that every high income earner should have. These are the things that they do really well and set them apart from everyone else. It's not always just about income, it's about the habits that you build around your money. And so again, today we're gonna talk about those five habits that those high income earners have and consistently get right. And then also, how can you start applying them as well? These habits help you accelerate. To financial independence, reduce stress, and build long term wealth. And that's what we're all about. So, um, if you are unsure about how to do that after this podcast, you can always go to my website, Palm Valley wm.com, schedule a free consultation. We can have a quick conversation about your situation and what you should do next that best help yourself. But before we get into that, in today's episode, just want to go over some current events. It looks like the big, beautiful bill. the new tax bill is going to be passed here shortly. I'm recording Tuesday morning. Before July 4th, and it looks like it should get passed at some point this week. for most people it should not be a big change. It looks like they're gonna extend the, tax cuts originally in the first administration, of Trump, back in 2017. And, there will be some slight changes as, as far as taxes, Not taxing overtime or tips. So if you are in a service industry or you work hourly and get overtime, and that's a big portion of your, your income, this could be a big change for you. They're also going to increase the salt deduction, which I won't get into here, but, that will help out people, that have those state and local taxes. And then also it looks like you may be able to, deduct some, auto loan interest as well. So there are some changes coming. So just wanted to put that on your radar to go ahead and look out for, because these are some things that you can start planning for, especially if it gets passed this week, for the upcoming tax season. whether you like it or not, this change is coming, so why not try to maximize it to the best of your ability. So let's get in today's podcast, and that is five great habits that every high income earner should have. And so the first thing. First is they leverage their income to accelerate savings. Not only do they leverage their income to accelerate their savings, they're always thinking about how can I increase my income, not from their normal. three to 5%, increase in, in pay every year. But what can they do? Are there degrees? Are there businesses they can start? are there different companies that they can work for to get a large increase? Are there promotions that they can work toward? Right? And so thinking about. Increasing that income over and above inflation. Again, this will allow them to accelerate their savings so they don't just make a lot, they continue to think about how to make more, and then they use it well. So they're maxing out their 4 0 1 ks. They're thinking about backdoor Roth because, of the income that they're making and they're building taxable brokerage accounts. We talk about that all the time. The taxable brokerage account is going to give you. The most freedom, as you start to build wealth because you're not tied to, retirement, potentially penalties if you're taking those out early. you're not stuck until that 59 and a half. but you can also invest long-term, for that and plan for that. But, if you do need that for an early retirement or large purchases, in the meantime, you can always tap into that taxable brokerage account and that will give you. plenty of flexibility. The most flexibility, right? and so the other thing is they have high savings rates. So they're not just saving the seven or eight or 10% or just getting the match on their 4 0 1 ks. They are saving somewhere between 15 and 20%, sometimes more of their income. So as their income increases, they don't allow their lifestyle to increase in a way that they're only able to save. Just the 10 or less percent, they are striving to save 15 to 20% of their income. This will accelerate their wealth quickly, right? So if you're saving 20% of your income, you're basically saving your, one year's worth of income in five years, allowing that to get into the market. And the earlier you do that, the more you invest, the longer you invest, the faster you're going to build that wealth. one of the easiest things you can do to kind of set and forget this. Is you automate those savings, make it effortless, effortless, uh, 4 0 1 Ks obviously allow you to do that. Do that through payroll reduction. pro tip here, you can always add, or most of the time you can add in an automatic increase every year. So let's say you start out at 10% a year from when you started that 10% or started that 401k, it will automatically increase to, let's say 11% or 12% depending on how you. Put that setting. so a couple years down the road, you could be at that 15%. We don't always have to rip the bandaid off. sometimes that can shock the system a little bit, and not be, something that you could sustain. So. Doing that slowly over time can help. But again, the pro tip here is that just, hey, set it to where it automatically increases every year. Again, this will take away that, that ability for lifestyle creep to come in and start eroding your wealth away. The other thing you can automate is your Roth IRA. Contributions or IRA contributions and your taxable brokerage account contributions from your bank account. So go ahead, pick something, whether it's maxing your, your Roth IRA, in one chunk because you have to do a backdoor Roth, or maybe you're still have the ability to do a normal contribution, go ahead and set that up and forget about it. same thing with taxable brokerage account. Pick something you're comfortable with, get to a, a, a nice percentage again that you're comfortable with. Set that and forget it, and then review it six months later, oh, did I really fill that couple hundred dollars coming out into my brokerage account? No, I didn't. Let's bump it up to a few more, a hundred dollars or to a thousand dollars or whatever. And then six months down the road, did I fill that coming outta my bank account? Nope, not really. So then I can start to increase it again. We don't wanna feel retirement poor or savings poor, but we want to, again, have the ability to retire early or just be financially independent work because we want to, not because we have to. Right? So. A client who front load savings and enjoy, will enjoy more freedoms later in the year, right? if you can get some of that savings done early, like the Roth, IRA, like the 4 0 1 Ks, then later on in the year, you'll have kind of a quote unquote pay jump where that money will not be coming out for those accounts. And you can use it for other things, maybe like Christmas and travel and whatever the case may be for your particular situation. Number two, the number two habit that most high income earners do that make them or help the set themselves apart from other high income earners. is they make intentional lifestyle decisions. Again, I talked about this a little bit, number one, but avoid that lifestyle. They avoid lifestyle create. Just because you can spend doesn't mean you should, right? You should have, goals or at least visions of what you want into the future, so that. As your income increases, it doesn't slip away. So maybe you do have aspirations of buying a bigger house or having a boat, or having a vacation home, or spending X amount on travel each year. And if you. Aren't intentional about what you're spending. A lot of that, a lot of that income that is increasing can slowly erode because maybe you're spending too much at, Amazon or doing this or making impulsive decisions like cars and things of that nature. And not that those are necessarily wrong, but if they don't fit into what you value and what you want to achieve. Then we shouldn't put as much, time and resources and money into those types of categories. Right. the other thing is cap lifestyle rules. So I talked a little bit about this last, last week, but, or a couple weeks ago, my, my income will steadily increase just as a personal example, hopefully quite a bit over the next handful of years, if not longer. and I have a set, budget that I'm going to use and I'm going to try to keep that for as long as possible. Let's say about$10,000 a month is what I want to spend. Whether my income is a hundred thousand dollars a year or a million dollars a year, I wanna try to keep that lifestyle the same, right? There are certain things that, me and my family want to do, and we wanna make sure that we can do that. And, and of, of course, and inflation will start to eat away at a little bit at that, over the next, handful of years, 10 years, whatever that may be. but I wanna try to keep it at that$10,000 a month. Four, as long as I can, handle it so that I can continue to save and build and have that cushion so that when we do decide to increase our, our lifestyle, one, I can still keep my savings rate fairly high. and two, we're working toward, becoming financially independent to where I don't necessarily depend on the income that I receive at that point. I just do it because I love working with clients and helping them, achieve financial independence as well. the next thing, I kind of alluded at this earlier in the topic, but just make sure your spending is aligned with your values, not just your income. Just because you make a lot, again, doesn't need you need mean. You need to spend a lot. You should have goals. You should think about the things that you want to spend on, so that you can understand, what you shouldn't spend on, what you should be saying no to. Again, if you're not a big foodie, if you don't necessarily have a preference on the type of food or checking out new restaurants and this and that, There's no reason to really eat out a bunch, right? that could just be a, a big waste of money where you could come in, buy your groceries and cook, and use that elsewhere, whether that's travel or whatever, right? so freedom, I. Is the result of discipline, not just dollars. Number three, and this is probably the most underrated thing, that I see, but the, the most successful clients that I have have great communication about money with their spouse. No surprise, probably most of you listening. But one of the top reasons people get divorced is money, right? So infidelity and money. the one, the clients that I have that are the most successful, not necessarily the highest income, but the, the ones that save the best and, and are building the wealth the best, based off their income, are the ones that communicate well with their spouse. They have strong communication skills. They have a strong financial partnership with their spouse. they check in regular about. Budgeting and, what their investments are doing. Talk about the things that need to, they need to save for, whether that be for their kids or trips they want to take, or things that they need to buy that are kind of more expensive than, the day-to-day items that they purchase, things of that nature. and so some of the things that you can do, let's say you don't, feel like you have a great communication about money with your spouse. And this is, probably a lot of you. Right. Um, I know that I could do better with my spouse as well at, at some points, right? Um, but have money dates have set times that you sit down and you talk. And it doesn't have to be this in-depth thing all the time. It could just be, Hey, how did we spend this week? Right. Um, once you kind of have an idea of, Hey, these are the things that we want to do this year that are gonna have to take some time and effort to save for, or at least plan for, um, have a monthly check-in or a weekly check-in, whatever is best for your schedule. And say, Hey, how did we do during this time period? Did we save enough? Did we spend properly, did we make, a bad decision? how can we fix that moving forward? Um, did some sort of emergency pop up like I just had to have. some, some, parts of my truck replaced and things of that nature. we weren't planning on spending that thousand dollars, hey, how can we make this up? Is there another place that we can cut this month, or in the next month to make up for it so that we can still stay on track for our goals, and replenish our emergency fund. So there's a lot of things that you can do, but the biggest thing is just be open and honest about spending. There's. A thousand ways to skin a cat. there's a thousand ways to budget with your spouse. There's a thousand ways to set up your money with your spouse, whether you have one joint account, whether you have, a bill account and you have two separate accounts that are your spending accounts, whatever that may be. Set something up that works for you guys. The biggest thing is to communicate that, be on the same page, and then check in regularly on how you guys are doing. Right. Um. Again, it doesn't always have to be this in-depth thing, especially once you get on a good cadence. It could be a 15 minute check-in. and sometimes it may be a, a bit longer, a check-in, but, Whatever you need to do, make it work. So make it work. Make it work. Make it work. And so number four, they minimize consumer debt. Almost none of my clients that are doing really, really well have. Credit card debt have a lot of auto loan debt. That doesn't mean all of them do or don't, but the vast majority of them are minimizing this consumer debt. No high interest debt, dragging down their net worth, no credit card balances that are unnecessary. they pay those those balances off every month. They're within their means on their auto loans. They're not spending thousands of dollars a month just to have a truck or a car. They're keeping that low so that they can put that money towards saving or partly to their lifestyle as well, and leaving that flexibility. The last thing you want is to be owing thousands of dollars in interest in credit card debt. Or be stuck with this large car payment for 3, 4, 5, 6 years, and not be able to do some of the things that you want to do, whether that be saving or just have a little bit more extravagant lifestyle. make sure that you are avoiding those high interest rate debts. That does not mean there's good, there isn't good debt.'cause there certainly is, making sure that you have a, a good mortgage and things of that nature. Like there's, there's times where you should, or not should, but you can have debt and it's not necessarily a bad thing. But if you're getting those, those high. interest credit cards and personal loans and, and car loans that are just unnecessary. that's where you want to make sure that you're avoiding. So if you do have those types of things, now, get with somebody or get with your spouse or get with yourself and come up with a way to get that stuff paid off as quickly as possible, because especially those credit card debt. They are somewhere between 15 and 30% likely. and as much as I would love to say that I could get you that on a regular basis, from, from investments, uh, likely that is not the case. nor can any other advisor. So if they say they can run, um, so the best thing to do is just to pay off those credit cards and, avoid paying that interest and then go back to investing because, you just. You're just gonna waste a lot of money, paying that interest. keep that credit card debt down. keep that consumer debt down and, and you'll be kind of, and you'll be, ahead of most people. Number five, surround yourself with experts. So. The high income earners that do really well, they all have experts around them. So what are experts? Certified financial planners, CPAs, estate planning attorneys, insurance advisors. They know their, where their expertise lies. So whether they work for a large corporation, and they have some, some sort of specialized expertise, whatever that may be. Most high income earners know that their expertise is not in financial planning, it's not in estate planning, it's not in tax planning. And so they get a team around them to make sure. That that team is doing what's best for them. So they don't do it alone, especially when it comes to this complex planning. like I, like I stated earlier in the podcast, there's a big, tax bill coming, that will I. N we will provide some changes that you need to plan for, right? And so having a, a certified financial planner, a CPA estate planning attorney, potentially insurance advisor on your team, will help with pivoting and making changes to your plan based off new tax laws. Changes in your life, whatever that may be. And the benefit is again, going to be giving you clarity, giving you confidence that your plan is working, and it's going to give you time. Right? Again, a lot of these high income earners are busy. They work long hours. They wanna spend that time that they have off of their family, not worrying about what their investments are doing or what, tax strategy that they should be, utilizing at this moment or what have you. Right. and so the team allows you to be proactive. Versus reactive later on in the year for tax planning and investment planning and things of that nature. So get a team around you. these are what the most successful people do. and so again, these are just five things that I've noticed that my most successful clients do and have. And so if you can do these five things, you're gonna be light years ahead of most of your peers around you. and so again, what are those five things? Leveraging your, leveraging your income. To accelerate your savings. So increasing your income so you can save more, and doing things like automating your savings so that you can continue to save more. making sure that you're intentional, intentional about your lifestyle decisions, like budgeting and things of that nature. Communicating well with your spouse about money. this makes, makes things way easier, especially if you have a spouse. Minimizing your consumer debt. The last thing we want to be doing is paying interest to these, crazy credit card companies, and then surround yourself with experts to make things, easier, give you more competence, and save you on time. And so, again, if you're unsure about how to do some of these things, you feel like you, you're doing the right thing of, of getting a good income. Maybe you're doing some of these things on those list, but you're just unsure. Hey, am I on the right track to get to financial independence when I want to, or be able to retire when I want to? You can always reach out to me through my website, palm valley wm.com. schedule a free call. We can have a conversation. If you think we can work well together, that's great. If not, we hopefully I can give you some insight on what you should do and how you should move forward, after that call. And if you liked this podcast, go ahead and leave a five star review. On your favorite podcasting app, and please share this with a friend. this helps the podcast grow tremendously, and that's what I want to do. I wanna grow this podcast so I can educate people on how to become financially independent. the most freeing and best feeling is knowing. That no matter what, you can live the life you wanna live and not be dependent on some job or some income that you have to do, right, giving you the ultimate freedom. So again, thanks for listening and we will see you in the next one. This podcast is for educational purposes only. It is not meant to be investment or financial planning advice. It is. Do not make decisions based on this podcast alone. Please seek professional help about your specific situation. Please seek Palm Valley Wealth management in mind when making those considerations.