Sold a successful startup?
Recently came into an inheritance?
Made a smart crypto investment that really paid off?
However you landed in the “new wealth” category — congrats!
Now, you just have to learn how to stay wealthy.
And yeah, there’s a little more to it than just not spending your money.
What does it mean to be newly wealthy exactly, does one really need special tactics once they enter this category, and what could thost tactics possibly include?
You’re about to learn all of that and more in this, The New Wealth Management Playbook.
What Does “New Wealth” Actually Mean?
Unfortunately, the French phrase “nouveau riche” — aka "new rich" or "new money" in English — has mostly become a derogatory term for people who are newly rich and highly prone to conspicuous consumption.
However, a more accurate definition of the nouveau riche is people who have achieved upward social mobility, aka moved from a lower social class to a higher one, thanks to a new supply of wealth.
For the newly rich, their wealth is usually created by themselves, instead of inherited. Those with generational wealth can be referred to as “old money” — a term that describes people who have maintained family wealth generation after generation.
What Does it Take to be Considered Newly Rich?
While we agree with Harvard Business School professor and finance writer Michael Norton that income is quite different from the complex topic of wealth, the only (sort of) definition for the new rich does rely on income.
Here’s how The Associated Press outlines the “new rich”:
‘’Made up largely of older professionals, working married couples, and more educated singles, the new rich are those with household income of $250,000 or more at some point during their working lives. That puts them, if sometimes temporarily, in the top 2% of earners.”
Are New Wealth Management Tactics Really Necessary?
The thing about people who fall into this group is that they don’t have the same habits as the generationally wealthy.
They tend to be politically liberal but financially conservative, spending on average 60% of their pre-tax income.
And, much of that wealth comes from non-traditional means, such as brand partnerships, crypto trading, digital passive income streams, startup exits, and so on.
As the number of newly wealthy grows in the U.S., it’s time for new thinking and new strategies when it comes to managing it, protecting it, and optimizing it.
8 Steps to New Wealth Management
Becoming wealthy has very obvious upsides.
However, the upsides can be fleeting when you don’t have the tools you need to protect and nurture that wealth.
The next eight steps make up a comprehensive strategy for managing new wealth.
Step 1: Celebrate!
Let’s be real, the first thing you’re going to want to do once you’ve hit your goal number, or been surprised with a sudden cash flow injection, is celebrate.
So do it!
As long as your new wealth is sustainable and/or substantially higher than what you’re used to living with, we say splurge a little.
In addition to buying a treat or taking a trip, another way to celebrate may be paying off some existing debts, or taking care of the taxes on your gain.
We’re not talking about making any major lifestyle changes just yet — so no new, expensive mansions with new, expensive mortgages. First, work through the rest of these wealth management steps to make sure you’re positioned to make any long-term changes successfully.
Step 2: Park Your Windfall for the Short Term
If some of your newly-acquired wealth is a cash windfall, we recommend just letting it sit for a bit. Get used to the feeling of having it before rushing into any permanent decisions.
But definitely don’t stuff it under your mattress — or invest it right into high-risk assets.
Find an account where you can park your wealth that’s insured and secure, but still allows for easy access and use. A money market account might fit this use case.
Step 3: Document All Your Wealth Assets in One Place
Now that you’ve got the spending out of your system and your assets are tucked away somewhere safe, it’s time to invest in personal balance sheet software.
Kubera is a whole-life wealth tracker that provides unprecedented insight into all the assets that flow together to make up your wealth.
With the bird’s eye view that Kubera provides, you can keep better track of how your assets and accounts are performing, leading to more informed predictions, more achievable financial goals, and smarter investment decisions.
We know you’ve got a lot to think about right now, so we made it easy to get value quickly from Kubera.
Our clean, spreadsheet-like interface makes adding your financial details to Kubera intuitive. Plug in your account-based assets (like bank, brokerage, crypto and other accounts) as well as your assets without accounts (like cash, family heirlooms, precious metals, and more). Add notes, attach documents, create naming conventions, build out new sheets and new portfolios, and more to make your Kubera dashboard totally your own.
Once your assets are loaded, you’ll notice Kubera’s IRR for investments calculator. Using the information the platform has about asset value, cash flow, purchase price, and holding time, Kubera can automatically find the internal rate of return for many of your assets.
And if you click into the Recap screen, you’ll be able to dive deep into value and allocation percentage change for all of your assets, and how they impact your net worth, over time.
It’s features like these that empower Kubera users to truly understand their wealth, so that they can make the best decisions when it comes to protecting and growing it.
Step 4: Deal With Your New Emotions
At this point, things are getting real.
Now that you have a complete view of your wealth picture, there’s a chance your emotions are going a bit haywire.
Maybe you’re feeling overwhelmed with responsibility to all the people and organizations that could use a piece of your wealth.
Maybe you’re fearful of how people are going to perceive you now.
Maybe you feel some version of survivor’s guilt if you made out well while others around you didn’t.
There’s actually an unofficial diagnosis for the fallout you might be feeling: Sudden Wealth Syndrome.
There are a lot of complex feelings that come with big changes, and they can very often cloud our judgment. If it feels like you’re in that situation, don’t be afraid to reach out to a mental health professional to work through your emotions.
Step 5: Consult with Financial Planning Pros
While you’re at it looking for someone to help you with your mental wellbeing, you might as well start thinking about the professionals who can help you with your financial wellbeing.
Perhaps contrary to popular belief, we actually think a tax professional — local, if possible — is the first person you should consult with.
High-net-worth individuals (HNWIs) are subject to a lot of taxes, such as:
- Income taxes — federal, state, and local
- Ad valorem taxes — based on value of transaction or possession, property tax is a common example
- Transfer taxes
- Inheritance taxes
A tax pro who is familiar with codes in your area and best practices for mitigating how much you need to shell out might just prove to be worth their weight in gold.
Other folks who can help you include professional insurance agents, accountants, financial advisors, and perhaps even a portfolio manager for investment management that aligns with your goals.
But how do you find the right ones?
You can start by asking people you know for referrals. We don’t recommend working with a financial professional who is also a personal friend. That’s just a recipe for messy or ruined relationships.
You can also ask your bank or any other financial groups you currently work with for suggestions. If you value speaking to your financial pros face-to-face, do an internet search for “insurance agent near me” and so on for every type of service provider you want to connect with.
Some professions have databases where you can search for someone based on location, financial services provided, etc., such as the CFP Board for certified financial planners.
We would highly recommend you take some steps to ensure all of these people are who you think they are. Aside from reading online reviews, you can even ask them for references and inquire about who their typical clients are to determine whether you fit into their wheelhouse.
You should also run their names and/or license information through your state’s resources, such as the board of accountancy, financial regulator, insurance regulator, and so on to ensure they’re above board and don’t have a bunch of consumer complaints. There are also national databases like the Investment Adviser Public Disclosure website, run by a government agency, and BrokerCheck, from the Financial Industry Regulatory Authority (FINRA), where you can make sure financial professionals are registered and research any disciplinary actions.
Once you start digging, there really are a lot of resources like this out there to help you choose fiduciary professionals who are only looking out for your best interest.
Step 6: Step Up the Insurance
Once you connect with an insurance professional, it’s important to consider whether your new wealth should come with some higher-powered insurance.
Some people take out personal umbrella insurance policies, which offer more protection than the home and vehicle insurance policies most folks have. This is especially valuable if there is an increased chance of you getting sued.
Then there’s life insurance, which can help transfer large sums of money to beneficiaries without the typical tax burden — something that suddenly becomes a lot more important when you suddenly have a lot more to pass on to future generations.
Step 7: Conduct Estate and Beneficiary Planning
Speaking of future generations, this may be your chance to set the stage for generational wealth that keeps helping your family even long after you’re gone.
That’s going to require some estate planning.
Estate planning is the process of making arrangements for what happens to your wealth, your possessions, and even minors who may be in your care at the time of your death. These arrangements often take the form of a will, a trust, a 529 plan for future educational costs, power of attorney documentation, and more. They should all be made under the guidance of a professional estate planner (you can start your search for one on the National Association of Estate Planners & Councils website).
Estate planning is critical for everyone, as wealth that isn’t accounted for can be eaten up by fees and taxes, siphoned by nefarious parties, and held up in legal battles for years — instead of helping your family and organizations of choice.
This is another area where Kubera can be of assistance. Our beneficiary management feature provides a digital “safe deposit box” where you can store your estate planning documents and any other resources related to protecting your wealth. Choose a beneficiary to receive access to these, as well as the entirety of your Kubera portfolio, when you’re no longer able to manage them.
We use an automated “dead man’s switch” to make sure the right person gets the access they need when the time comes.
Step 8: Consider Putting Yourself on Salary to Make That Wealth Last
The final step to managing your new wealth effectively is putting a little distance between you — and any not-so-well-meaning friends and family — and your money.
That means asking your trusted financial professional (portfolio manager, investment advisor, etc.) to put you on a salary of sorts.
With this practice in place, you’ll always have what you need to live off of and can truthfully tell anyone who asks that it’s not as simple as putting cash in their hand. Now, there’s a process and a person to answer to when one-off expenses arise. This can help you think twice about poor spending decisions and will likely deter any shady characters from pressuring you.
This step highlights one last time how vital it is that you trust, and regularly scrutinize, your financial professional’s practices.
Start Protecting Your Wealth at Any Stage With Kubera
Whether you’ve achieved “nouveau riche” status or it’s something you’re still aspiring to, it’s never too soon to get your financial affairs in order.
We made Kubera easy to use and easy to afford so DIY investors just like ourselves could get started at any stage in their wealth journey.
If you’re one step ahead and already have a financial advisor, you can still work with Kubera. We’ve created a white-label solution that they can easily integrate with the tools they already use to provide a more modern asset management program for you and the rest of their clientele.