Creating significant wealth in Arizona is difficult. For most people, it involves starting or owning part of a business and doing everything they can for it to take off. However, you’d be surprised to know that keeping your wealth is even more difficult than getting it. Here’s why.
The state and the federal government take a hefty chunk of your income in taxes, sometimes up to 50%. In addition, almost every time your money grows or you move it, the IRS will hit you with capital gains or estate taxes.
To minimize the impact of taxes, consider structuring your wealth in such a way that you pay as little as possible. For instance, you can use legal tax shelters, form an LLC and/or set up trusts that minimize your burden.
Inflation is the enemy of wealth preservation. As prices rise, the value of your money decreases. Over time, wiping away a significant chunk of your wealth. Investing in assets that are likely to maintain or grow their value over time, like stocks and real estate, may help.
The stock market is notorious for being unpredictable. A single event (like a pandemic, elections or a major business announcement) can lead to wild swings that send your portfolio into a tailspin.
The only way to deal with this is to have your money in various investments so that if one asset class takes a nosedive, the other will cushion the blow. Consider industries or markets that are completely different or have low correlations.
Poor financial decisions
Accumulating debts, investing too much in one asset class or trading without research are all examples of poor financial decisions that can drastically reduce your wealth. Staying informed on market developments and setting yourself up with an experienced financial advisor with a proven track record can help protect against costly mistakes.
Wealth preservation is a challenge. You need to be aware of the different risks and take steps to protect your hard-earned money from taxes, inflation, market volatility and poor financial decisions. Being more tactical and diversifying investments across asset classes can help you maintain and grow your wealth over time.