In our PF/FIRE blogosphere, we all like to talk a lot about saving money and about reevaluating our priorities to need and buy less. This is life-changing stuff we’re talking about, but even still — an outsider reading some of our community’s stuff for the first time could be forgiven for thinking that we’re all a bunch of low-income earners trying to figure out how to stretch our meager dollars.
But, there are some super important times when it’s actually better to drop this low-income, super-optimized, super-frugal mindset and think like rich people, even if we never intend to spend money like some of them do. Because if you’re aiming for FIRE, at some point you do actually become a rich person. (Not to mention that anyone in the U.S. earning more than $32,000 a year is already in the global 1 percent — we’re practically all rich!)
This isn’t a post about buying a Bentley and hiring a butler. Instead, it’s about acknowledging there are different risks and opportunities when you have a high net worth, and it’s important to take certain steps in recognition of that.
Thinking Like a Rich Person
A big part of thinking like a rich person is simply acknowledging reality, which sometimes means recognizing that money has a way of bringing out the worst in people. Having a high net worth opens up new opportunities, but it also makes you a target.
FIers are a paradox: the paradox of the couple/person/family who’s both rich and poor. (Asset rich, income poor.)
Though so much of our financial life now is retraining ourselves to think like versions of ourselves with a much smaller income (income poor), to prepare for when our income really will be small in retirement, in other ways, we’re having to retrain ourselves to think like rich people (asset rich).
Here’s how we’re shifting our thinking:
Acknowledging you’re a target — When you have a high net worth, you’re more likely to be sued. And it could be for whole range of things that aren’t your fault: A contractor in your home subs out some of the work to an unbonded trade person who gets hurt while working for you. A friend attends a party at your home and then gets in a drunk driving accident on the way home. A girl scout selling cookies trips and falls on your front steps. For someone with many millions in the bank, these types of lawsuits don’t pose an existential threat (but still enough of one to put safeguards in place), but most of us aiming for FIRE aren’t building in a $5 million cushion. A single suit with all its legal fees could wipe us out, even if we win.
What a rich person does: Buy umbrella insurance. Umbrella insurance provides additional liability coverage above and beyond what you have from your auto/health/homeowners insurance to protect your assets. And it’s pretty affordable, too — we got a quote from USAA for $17 a month for $1 million in coverage (the lowest option), $28 a month for $2 million. (We do not have $2 million dollar sitting around — we were just curious.) Every major insurer offers this coverage, though many only offer it if they also insure your car and home. If you own your home, you may also wish to declare it a homestead, which some states allow. This helps protect some or all of its value in the case of lawsuit or bankruptcy. [Update: We just purchased the USAA umbrella policy. It also required increasing the liability limits on our auto and homeowners policies to $300,000, so in total our premiums are increasing just under $40 a month all in.]
Managing taxes — We’ve all heard the quote that Warren Buffett pays a lower tax rate than his secretary. And tax law in the U.S. anyway already favors the wealthy in some key ways, not the least of which is the much lower tax rate on long-term capital gains than on earned income. But as we’ve learned as our incomes have gone up, this fun little thing called the alternative minimum tax (AMT) also starts kicking in at a certain point, which chips away at your legit deductions and starts adding extra tax on top of it all. It’s for a good cause — to make sure top earners don’t use loopholes to get out of paying taxes — but it can add thousands of dollars of tax liability each year, which could make or break your FI plan.
What a rich person does: Start a shell corporation in Panama — kidding! While there are plenty of legal tax-avoidance strategies available to people with major big bucks, the more accessible and ethically less questionable approach is to control when you realize certain income. This is the idea behind 401(k)s and IRAs — you earn income now, but don’t pay tax on it until you intend to spend that money. Many of us who are retiring early are already maxing out these vehicles, which should reduce how much we pay in total taxes over time. But if you’re not, no better time to start than today! For early retirees, controlling when you realize income also means having the flexibility to decide when to do things like backdoor Roth conversions, to ensure that you’re not jumping up a tax bracket or losing a valuable Obamacare subsidy tier. (Go Curry Cracker has a good breakdown on that here.) Or you might consider doing a little tax loss harvesting, something we don’t do but we know lots of y’all do. Or even starting an LLC or S-Corp for business purposes, like managing a rental property. There are lots of options available to reduce your taxes if you are willing to do a little research.
Ensure your estate is distributed as you intend — While estate planning is important for everyone (and we did a full breakdown on ours here), a high-value estate is certainly more consequential than, say, a $50,000 estate. Without proper planning — a legally valid will, for starters — your assets could end up anywhere when you die. Or, worse, those left behind could end up fighting over all of it. Even very decent human beings can behave quite badly to one another when it’s over a sizeable sum of cash, like a large inheritance, and the last thing you want to do is have your passing drive a wedge between loved ones. You may also wish to leave a large bequest to charity — we know we do.. Even with a will in place, the disposition of most high-value estates still ends up in probate court, a long, expensive, bureaucratic process.
What a rich person does: Put in place a comprehensive estate plan and trust. Most high net-worth individuals have not only a detailed will in place, along with the medical side of things (advance directive, durable health care power of attorney, last wishes), but also some form of legal trust. The most basic, the revocable living trust, allows your estate to stay out of probate and reduces the threat of legal challenges against your estate. We haven’t set one of these up yet, but it’s on our list.
Considering alternate investments — High net worth individuals have asset allocation that looks different from what the rest of us have. The super rich, for example, have access to private equity and hedge fund investments, which aren’t available to most people publicly. But that doesn’t mean that we can’t all think differently about how to diversify our portfolios.
What a rich person does: Look for other ways to make assets work for them. In addition to buying the standard stock funds and bond funds, a lot of aspiring FIers have gotten into the Lending Club assortment of private lending, and we have made a personal loan that’s giving us a solid rate of return. Venturing into lending is an inherently more risky proposition than basic investing, so it’s worth doing lots of research, but it can be a great way to diversify and get some better rates of return, especially when markets are flat. Leveraging assets to increase earning could also include things like renting out your home on Airbnb.
[Update: We also think a spirit of generosity is a hugely important part of thinking like a rich person — and just being happy generally — and have a post about that coming soon!]
How do you think like a rich person?
Some of this stuff is a big shift for a lot of us, especially after we’ve spent a lot of time changing our mindsets to focus on less and enough. But not acknowledging that we have significant assets saved up can be an even more costly mistake than overspending. What do you do in your financial life to protect yourself and your family? We’d love to hear more ideas!
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Categories: we've learned
I love how thoughtful and thorough you are in preparing for FIRE. I have not had to think about some of these points yet, like people ever wanting to sue me! So thanks for addressing these topics. And I’m glad to hear that your personal loan is going well so far.
Thanks, Kalie! You can chalk it all up to my risk aversion. Basically, if there’s some way to hedge our bets, I’m thinking about it. :-) And yeah, so far so great on the personal loan! I can’t wait to write a post in five years when it’s paid off on why it’s okay to go against the conventional wisdom and do money favors for family. Because if you can’t help the people you love improve their lives, what’s the good of all of this money saving anyway? :-)
We do almost everything you’ve covered here, with one exception. I can’t believe I’m typing this, as a lawyer with specialization in tax, trust and estates, but we do not currently have a will. Time to put that on the priority list! In fact, for many years almost all of our assets would transfer outside the probate process (401(k)s and IRAs have their own beneficiary designation, and our home is owned jointly, so if just one of us goes, the other one pretty much gets everything, and then all to the kids). But now we do have a bit that would go through probate (taxable accounts for us), so I’d better get to work!
I think I look at “thinking like a rich person” a little differently, perhaps because I’ve always done most of the things you describe. To me, it means becoming a bit less miserly with the money, and being more open-hearted and generous. This means charity, but also being a good tipper when we do eat out or hire service people. While I believe in watching my pennies and know that it does make a difference to me, that dollar tip at the coffee store, or $10 to the hairdresser, means a lot more to them and their livelihood. I suspect many of us do all these things now, but something to consider.
Hahaha — Well consider this today’s kick in the butt to get that will going. At least you know how to crank one out quickly, given your expertise! And since you know this stuff, do you think this advice is sound, that we can do a trust without involving lawyers? http://www.nolo.com/legal-encyclopedia/making-living-trust-yourself-29736.html Local lawyers charge like $5K to do a living trust, and that’s definitely not in the budget. But if we could DIY it, I’d seriously consider doing it ASAP.
And I LOVE your point about generosity — I have a post in progress on that very topic! I agree 100% that it means a whole bunch of things — charitable giving, being a good tipper, not being stingy with employees or people you hire for projects, volunteering, giving of your expertise to help others coming up behind you, etc., etc., etc. Unfortunately, I don’t think those qualities are universal to rich people (this study always cracks me up on that front: http://www.theatlantic.com/health/archive/2012/05/does-organic-food-make-you-a-judgmental-jerk-maybe/257465/), which is why I didn’t include them here!
Very true, I guess those are not actually typical qualities of rich people! Just the way I want to behave, especially because I have resources.
In regards to on-line legal resources, for most basic situations I believe they are absolutely fine. Lawyers charge way too much for what tends to be a template document, where they use a lot of “find and replace.” The thing you may need a lawyer for is anything special that you may not have thought of, but those things don’t apply to 99% of people. That said, standard disclaimers apply–I am not your attorney, and none of the above should be considered legal advice. For advice on your own particular situation, please consult an attorney. ;)
Caveats understood. :-) Thanks for this good info!
Two things in this post have been on our to do list for about 3 months – evaluate our current insurance coverage (we are going to get an umbrella policy) and setup a will.
Legally avoiding taxes is one personal finance area that I have not spent much time on ( outside of the basics – 401k and iras)
Rich people seem to be comfortable with risk and are willing to pounce when opportunities arise. Maybe that is because they have piles of cash to fall back on – but more than likely it’s how they made the pile.
That’s great that you’re planning to take care of your insurance and will! High five. :-) We recently wrote about taxes and the truth is we don’t take all the deductions available to us as it is — so we aren’t thinking like rich people there either. But we might explore doing an S-corp or LLC after we retire, to manage our rental property or other new businesses we start. And yeah, agree with you 100% on rich people being willing to take risks! You can certainly dream a lot bigger when you know you’re not at risk of financial ruin!
Yeah, I really need to write a will (and possibly get some umbrella insurance). I keep putting it off since I don’t have any dependents and because I have designated beneficiaries for all my investment accounts/home/life insurance. It’s the sort of thing that seems not 100% necessary before I get married, almost as if I *don’t* write a will then I can’t die young out of nowhere, right?
Oh yeah, write that will! We’re fans of the low-cost DIY products on NOLO if you don’t have a template you plan to use. But there are tons of free templates online too, of course. And yeah, I definitely know what you mean about that superstition that not having a will means you can’t die young. :-) If only that belief actually worked!
You know – a shell corporation in Panama isn’t as hard to set up as you might think, and it offers some amaaaazing benefits. Oh wait, we never went through with that plan, whew….
We are pretty much in line with everything on there except the Umbrella policy, which reminded me, oh yeah, we keep meaning to get an Umbrella policy. :) Other than that we have a will, and even a list of institutions and types of accounts there, so if something happened to both of us people would know where to find our assets and things. Even apersonal asset inventory, so people would know which of our personal assets are important and which aren’t. Like one of my banjo’s has a great sentimental value to me because of how I got it with my dad, and one of my guitars was my grandpa’s that he had the whole time I remembered growing up – so don’t sell those. My dulcimer was a gift from my grandma to my grandpa for an anniversary, and she had it handmade especially for him. You know that kind of info. :)
I think “apathy ends” is onto something with the thought that rich people are more comfortable taking risk and also having the freedom to invest and if it fails, they’re not in a situation where they aren’t eating that week. It’s a totally different mindset when you’re in one boat versus the other.
Well, we’re personally partial to the Caymans, since they’re not under such U.S. scrutiny. Wait, did I just say that out loud? ;-)
I love that you have specific instructions for meaningful instruments! That’s so perfect. We actually need to update our additional instructions doc, so thanks for that reminder! And I just read that we can do a trust without lawyering up, so we may actually do that sooner rather than later.
And YES, thinking like a rich person definitely means being more comfortable with taking some risks… that’s one area where I think I might be fine continuing to think like an income-poor person. :-D Haha. We have an upcoming post about appreciating our safety nets, which I think is the same idea — we’ve never once been in actual risk of being homeless or going hungry, and that’s incredibly powerful in terms of what we see as possible for our lives versus what other people who don’t have that backup protection might see.
These are all great things to think about on the path to FIRE. As a bachelor, not all of these make sense for me but they are in the back of my mind for when the time comes. Great job checking all the boxes before you FIRE.
Yeah, keep em in the back of your mind. Plus, I know we were just talking marriage penalty, but once (if?) you combine assets, if often puts you in the category where you have to think about some of this stuff. :-)
Wow, heavy post! I love your take on this issue and definitely agree that, while frugality is the absolute best way to live within (or below) your means and to accomplish your financial goals, there are particular expenses that should not be overlooked.
Admittedly, we don’t have umbrella insurance, and we actually pay a “tax guy” to do our taxes for us, which usually ends up saving us far more in tax liability than we are spending for his services. Both my wife and I were victims of identity theft in the past, so our tax returns are both under a little more scrutiny (protection?) from the IRS. Thus, we want to make doubly sure that we’re submitting the right paperwork and wading through this nonsensically expensive and bureaucratic tax system that we have in this country with as few mistakes as possible. For us, money well spent.
In general, we also don’t look for the cheapest product out there when we comparison shop. We simply look for the best value and are willing to spend more when the value is there. We don’t compare prices. We compare value. Important distinction! :)
I would never begrudge someone a tax guy, especially if they have special circumstances like you guys do! Man, identity theft seems so scary! We’ve had our credit cards frauded plenty of times, but never any real identity stuff. Knock on wood!
But I do hope you’ll consider an umbrella policy, especially because your net worth is out there, and most lawsuits are vehicle-related… and you guys will be living on the road.
One thing I hear pretty often is to buy quality. If you spend wisely by buying things that last (and you spend money to maintain what you have), you end up spending less over time. If you always look for the least expensive option up front, you end up with a lot of replacement cost. Now, if it were just easy to recognize quality…
Yes, totally great point! I would have included that here, but we just talked about that Monday. :-)
There’s also a higher time trade off when you think rich. You realize your time is worth more than minimum wage and you make tradeoffs accordingly. You also see a lot more opportunity in everything because you’ve had those opportunities in the past. Everything turns into more possibility when you think rich.
Totally agree with you, but man that’s a slippery slope! I suppose we still think this way in terms of paying for snow removal and certain home maintenance tasks. But there was a time when I paid for fluff-and-fold for our laundry, and did some other outsourcing that now just seems like a waste of money (although that fluff-and-fold was soooooo nice… it was folded so perfectly, and I’d just put it right in our drawers. Ah, memories…). :-)
Oh I agree. But because you used to hire out for those things, you have outsourcing as a possibility. The poverty mindset includes no outsourcing. That one mindset shift changes quite a bit because it allows you to trade one task for making more money, for example.
You’re totally right on mindset, of course. And that’s super important in terms of what you see as possible in your life!
I’ve noticed that I’ve been doing a lot more things like this over the past couple of years… estate planning, optimizing tax strategies, umbrella policy, etc. We are in the process of deeding over our rental properties to go under our LLC as well.
All the things you mentioned just need to be done in order to both continue to grow and protect yourself at the same time.
I would think another important way to think like a rich person is to do just that… learn to think like them. I now spend a lot more time reading from the masters and just talking to people who are already there (such as financial mentors) just hoping to pickup anything that might help me now or down the line.
The LLC or S-corp route is something we need to look at more. We feel like it’s too much trouble for now, but after we retire, maybe not! And it’s a great point — if your goal is to grow lots of wealth, who better to learn how from than a person who’s done it? :-)
Much easier than I anticipated – this was actually the second LLC I formed and I did it through LegalZoom. Creating the LLC was easy enough and changing the deeds over is straightforward enough as well. Feel free to reach out if you decide to go that route.
Good to know! We’re probably a ways off from doing that, but I’ll let you know! :-)
Anyone not familiar with these concepts probably does get confused by the premise of early retirement. We’re supposed to saving up for a lavish retirement, when we’re too old to really enjoy it, right? I agree with your advice to be wary of the reprecussions of being “asset-rich.” Even now, while we’re still paying off debt, we have some equity built up in two properties. I’m not exactly sure how that would work in a lawsuit, but it’s probably something we should look into a.s.a.p.
Some states protect the equity in your primary residence from lawsuits, and some states protect your retirement accounts… but some states protect nothing! So it’s worth knowing what you’re working with, and insuring yourself accordingly! :-)
If you think rich you’re putting out that thought to the universe, so the universe will return “richness” to you. Exactly why I think it’s important to think positively – what you focus on expands. :)
I think that’s true for a lot of people, especially those who have the freedom to take risks because they can fall back on family support. So if you’re in that lucky position, then YES! Think positively and trust that there’s always more money out there!
I think like a rich person when it comes to issues that are not visible to others. For example, insurance. No one knows how much coverage we carry, or at what cost. You could definitely make a case for us being over insured for both our home and our vehicles. I consider it money well spent. I also think like a rich person when it comes to estate planning. We have a living trust, wills, POA’s, health care directives and the like, and we review them annually. I think like s rich person when it comes to income tax preparation (although I’m intent on at least attempting to change that next year). I think like a rich person when it comes to health care, both in premiums and in quality of health care providers, and in quality of food, personal care and cleaning products. For external, visible to others issues, I think like a poor person, focusing primarily on cash flow rather than assets. So for home improvements, vehicle repairs, entertainment, etc., I tend to keep a very low profile. We live in a conservative, lower income area of the state, and flaunting any kind of wealth could potentially leave us open to who knows what? It’s not a wise path for us to follow. We keep our asset base to ourselves, making us truly the millionaires next door (but we’re perfectly fine with that). My primary focus remains reducing outgo and preserving assets, regardless of account balances.
We think we’re on exactly the same page as you. We’re super cognizant of how we appear around town, though not like we’d ever look like flashy rich people. We’re too cheap for that. :-) But we’re all about protecting our assets every way we can!
Best to maintain low tones, I’ve found. We do spend like millionaires on vet bills (don’t know how that one escaped me), but only the vet and his staff know that!
Haha — I think that’s a good use of money. :-)
Very good post. I especially relate to the point on having an umbrella insurance policy. This can be very important and is often underestimated. For example, say you are at fault in an auto accident and the liability exceeds your car insurance limit of say $250K, you are liable for anything over that amount. And depending on which state you are in, 401k or IRA assets could be at risk. This is where an umbrella policy would come in and protect you. Very important and not overly expensive so worth the conversation with your insurance agent. Thanks for the post.
The Green Swan
This is a good article on how retirement assets are treated in lawsuits and bankruptcy: https://online.citi.com/US/JRS/pandt/article.do?ID=JC25. Obviously worth verifying all of this with your own attorney, but it seems like they’re protected to some extent in every state.
I live in NC and don’t believe IRAs are protected under lawsuit and obviously having to file for bankruptcy isn’t a desired outcome. Umbrella policy is definitely the way to go.
Okay, gotcha. Yeah, pretty much no reason NOT to have umbrella coverage. :-)
I’m getting progressively worried about a “will”. I’ve never heard of those things except in American television, I’m not even sure if it’s a thing that has any legal meaning for me as a French citizen. I guess I should check…
I’d never considered that the American formulation of estate documents wouldn’t be universal! (Bad world citizen! Slap on the wrist for me!) But yeah, probably makes sense to know what the rules are in France. Although I also think it’s relevant where you die, unless you have specific instructions for your estate to be dealt with in your home country.
Very interesting. We probably don’t ‘act’ rich because we clean our own house, don’t eat at fancy restaurants, buy clothes at Target and catch public transport.
To be honest Australia has a very different culture (and I guess law?) with regards to being sued and I’m not even aware you can purchase umbrella insurance. We do have public liability insurance in our strata property but that is paid by all the owners collectively.
Property investing in Australia is definitely something seem as the ‘for the rich’ and unfortunately we have negative gearing tax consessions which encourage it. I’ve had a family member say to me ‘you have 2 properties, I have none!’. I calmly said ‘we also have 2 mortgages’.
We have a very simple will but no complicated trust arrangements but there are frequent stories in the media about very rich people who have these arrangements and then end up fighting their family members in court. Hey, I guess being rich can also bring out the worst in some people.
If you haven’t read the Millionaire Next Door, I highly recommend it. One of the biggest takeaways is that most rich people don’t “act rich” either — it’s the faux rich who do. And how we would love if the U.S. was less litigious and this stuff wasn’t necessary! After all, we already had $500K liability coverage on our homeowners policy, which covers injuries from workers on-site, and $300K on our auto policy, which should be enough to cover most injuries. But apparently in our lawsuit-happy culture, that is not enough! That’s interesting about owning property in Australia. Here is seems that people view it as more of an entitlement. One episode of House Hunters will teach you that people expect to have a giant McMansion for like $100,000 — ridiculous!
Yes that book is my bible :) Although I don’t drive a Toyota. Ha ha yes we have the ACTUAL reality of a the average house price in the city I live in being >$1m (about US$780k).
I figured you’d probably read it. :-) We’re Honda owners ourselves… Still rocking the 2004 Civic. And wow! That average price is CRAZY! Do you secretly live in San Francisco? ;-)
I had a dream I bought a Honda minivan after reading a blog post the other day. No sadly where we live is even more expensive than San Fran. But you know, we are so ‘rich’ we can afford 2 mortgages :)
Shows you what good an Ameri-centric view does for us — a whole lot of nothing! :-)
The biggest shift for me has been to buy more appreciating assets than depreciating assets. :)
That is definitely a good rich person lesson! :-)
We set up a revocable trust on the advice of ….wait for it….our former financial advisor. Even though there are a number of horror stories with that advisor that we have written about, this was one of the few wise things he did for us.
Well at least you got something good out of that relationship! Getting a trust in place is definitely on our list!
I just switched all my insurances to Geico and added the Umbrella policy for the first time. For $1 Mil in coverage its costing me $165 yr. I almost hate to pay it but I think its a good idea and gives me more piece of mind, plus Im saving quite a bit over my last policy. I figure I’ve been lucky not to have had any issues up to this point in my life – but things happen. Now at 47 with some assets, its probably a good move to have that protection. People can sue you for almost anything these days.
Nice! We just got our umbrella policy locked in, too! For all the reasons you said — so easy to get sued these days, and the coverage is pretty cheap considering the peace of mind it provides!
Goodness, you have got me thinking now, thank you. I like the premise of your post very much and I am trying to think how to apply it in the UK. I don’t think we are so litigious here, although we are working on it and I think our home insurance covers some third party claims (note to self, must check). The will has been ticked off for some time. We also spread our money across different organisations to minimise risk.
We’re so envious of countries like the UK that aren’t so lawsuit-happy! Evidently I got sued once and didn’t even know it, because my auto insurer just took care of it. And it was a very small suit. But yeah, that kind of stuff is SO common here!
Great timing on this post! We literally just came back from our lawyer’s office where we discussed getting our living will and trust started. We don’t have it completed yet, but we know the importance of having this done so our assets are well protected and won’t be subject to probate.
How great that you guys are on top of that stuff! You’re way ahead of most people. Just don’t overpay for those services — see Lucky Girl’s comments on this post. She’s an estate attorney and says that most of what they do is just cut and paste. :-)
Thank you for the tip! We really appreciate it and will definitely check it out! :)
I like your suggestion to look into umbrella insurance. This is something that is becoming more and more of a necessity for us as our wealth continues to grow. I agree that we are one lawsuit away from being stuck with nothing! I have also been putting off getting the whole will/trust thing setup – we really need to get our butts in gear on this topic too. Thanks for the reminders :-) More money more problems I guess!
I know it often seems like there are more pressing priorities than estate docs, but we never know when we’ll need ’em — better to be prepared! And we just activated our umbrella policy this week, and it took maybe 10 minutes. Super easy!
What I think separate rich people from those who are not or not-so-rich is that they almost always prepare a step ahead. Like for insurances, they cover themselves for the max that they can while those who are not or not-so-rich will only get, sometimes, the basics.
Speaking of will, I need to prepare a will. This is really important. No one knows what tomorrow will bring and not bring. It’s always best to prepare for something that we don’t know.
Such a good way to put the distinction. It’s the luxury of not having to worry about money — you actually CAN think a few steps ahead, instead of having to focus on what’s right in front of you. Though, I did read re: umbrella insurance that just having it means your insurance co. will mount a strenuous defense on your behalf whether or not you have the lowest level of coverage or the highest. And that’s apparently enough to scare off most lawsuits. Good food for thought! And yeah, get that will in order! There are some great free templates online, or low-cost options through NOLO and LegalZoom, and you can always change it later.
Yes. I’ve been looking for the past hour right after I read your posts. Thanks a bunch.
I “hate” it when you post articles like this. It is full of subjects I have not yet on my radar. Here I was, relaxing at home, thinking all is in control! Now, I have action s to tak! ;-)
Kidding! Thx for bringing subjects like this to the table. The one part I heavily underdo is estate planning. I actually have only a vague idea of what happens in case one of us dies! It is a need-to-fix.
The umbrella insurance looks less needed in our case. I think -not sure- the cases you mention are covered by our policies. Oh yeah, I might need to look into the babysitter.
Haha — sorry to be such a nuisance! :-) I feel like umbrella insurance is specific to the U.S., just because we have SO many lawsuits here. Ordinarily, basic liability insurance built into your other policies *should* be enough. But American lawyers just can’t get enough lawsuits! But yeah, you should definitely do some estate planning, especially for the sake of your daughters! I know you’d want to be sure they are well taken care of if something tragic happens to you and your wife.
You hit the nail. I do want to feel reassured that my wife and daughters will be fine. I think they will be ok, I will inform myself to see that I know it will be ok.
I so need to get a will in place so the money would actually go to whom I want rather then one or two greedy relatives that would spend it like a crazy person and then end up exactly where they started complaining I didn’t leave enough to make their life better
It’s definitely worth the effort on the will to get the peace of mind that comes with it. There are so many good, low-cost products online now — you’re just looking at a few hours to get the whole process completed.
There’s a tough balance here between thinking like a rich person on some items — like asset management, tax prep, insurance — while thinking like a cash-strapped (I was going to say “poor,” but that doesn’t really describe it) person on other items — shopping efficiently, minimizing waste, reselling things we’re not using, living without the latest and greatest new tech items, etc.
I’ve seen some of my high-income friends fall into the trap of thinking like a rich person on all the wrong things, from $100/week bills for Washio laundry service to hiring personal assistants and housecleaners. Some of these expenses could be good moves, of course, if they’re trading low-pay time for high-pay time, but most of the time I think it’s just an excuse to not do menial chores.
Your post has reminded me that getting umbrella insurance has been on my to-do list for about two years now. Hmm… maybe I need a personal assistant!
I *definitely* think you need a personal assistant. How else can you expect to be efficient in your life???!!! Haha. Yeah, I think finding the balance is key — isn’t it always. These are a few things where we’re trying NOT to think like cash-strapped people, but in general, thinking cash-strapped is a better place for us to be if we don’t want to burn through our savings. :-)
I used to think about creating a will but my ‘I dont have much, why bother’ thinking got in the way. But after reading this, I think I should look at it again and start planning. :)
Definitely worth doing! For peace of mind if nothing else. :-)
I love the idea of thinking like a rich person. As much as general society frowns upon the wealthy for being greedy (or some order dumb reason), I look at them and try to model some of my financial habits after them. Nothing crazy like going broke trying to sell a crappy fashion line like Kanye, but things like you mentioned about being smarter about investing and taxes.
I’ve had people look at me weird when I say stuff like I max out my Roth IRAs and put a generous amount into my 401k and my daughter’s 529 Plan. I say bring it on – I want to be weird. I figure when people are making fun of me for being good with money than I must be doing something right :).
Hahaha — I love your noncomformist attitude! I think the rich sometimes do some shady stuff, but I think you’re right that it’s smart to follow their lead on the smart things! We should make you a t-shirt that says something like “Retirement Account Rebel!” Hahaha
When people ask me what I did for my tax refund, i get a weird reaction when I say I maxed out my Roth IRA.
Apparently getting a windfall is cause for a fancy dinner and new outfit!
Your readers need to be aware that creating a trust is only step 1. You also need to fund the trust by formally transferring ownership of all your assets into the trust. Then you need to change all your liability insurance policies to name both you and the trust (you as trustee) as named and/or additional insureds (NOT additional interested party). Next, depending on when you bought your house, your title insurance may be voided (title policy rules change over time). If you quitclaim properties to an LLC or S-Corp, the title policy is certainly voided, but you might be able to purchase a cheap endorsement for the company (again, depends on date of original purchase).
All good and important tips! Thanks for sharing!
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Any advice on deciding how much umbrella coverage to purchase? Looks like USAA offers between $1 and $5 million. Thanks!
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