Think about your first car out of college. It was probably something fast or maybe something small and environmentally friendly.
It was all about you, and it just had to get you – and maybe one other friend – from point A to point B. Then you got married, and you needed something roomier, so perhaps you graduated to a sedan or small SUV. Then you added kids to the mix, and you started to think larger SUVs or minivans.
As your circumstances changed and your family grew, your priorities also changed – along with the size and type of your vehicle. When you’re single, it’s all about you with the flash or the “he/she cares about the environment” label winning over practicality.
But as your family grew, so did your priorities – where the comfort and security of your family now took priority over everything else. Think about your financial situation in the context of a growing family and the need to adjust your vehicle to accommodate changing priorities.
When you first start your career, you’re focused on yourself and your career. You put in long hours, and you don’t think about your investments. You go along with whatever everyone else is doing, so you set up automatic withdrawals to fund your 401k. Your employer lures you into the 401k box with employer matching, so “Why not?” you think to yourself. It’s the typical middle-class mindset.
When you first start in your career, you start in the middle class, and along with that middle-class income, we maintain a middle-class mindset towards investing – doing what your parents did or what your colleagues are doing. Then changes start to happen in your life where you need to rethink your priorities. You begin receiving promotions, and soon, you become a high earner. Your net worth may increase by 5, 10, or 15%. Along with your promotions, your situation also changes. You get married and soon add kids to the mix.
As your income and family grow, you rethink your financial path. Your priorities have shifted. You’re no longer single and worrying about just one person. You have others to take care of – both financially and emotionally.
You want to be there more for your kids, but you’re finding that you’re working longer hours because of your added responsibilities at work. From a personal and financial standpoint, you’re still driving a single-person car and investing like one, too – when you should be driving something better suited for your family’s long-term prospects. That’s why as your income grows, so should your investment strategy.
When you start earning more money and your family grows, a middle-class mindset regarding your investments will not cut it. A comfortable retirement shouldn’t be your only goal and shouldn’t be your long-term goal.
The wealthy – the smart investors who achieve financial freedom – adjust their investment strategies to match their shifting priorities. As their income grows, they start thinking about how they can buy back their time to spend more time with their families. They think about capital preservation and multigenerational wealth to take care of their children and grandchildren long after they’re gone. They think about tax benefits that will help them keep more of what they make. Most importantly, they think about creating additional income streams independent of their jobs to give their families security if they no longer have that job.
A 401k and the stock market are not the right vehicles for someone with shifting priorities from a growing income and family.
Someone who wants: 1) capital preservation, 2) multigenerational wealth, 3)
tax benefits, and 4) recession-proof passive income needs to consider an alternative investment vehicle for achieving those goals.
Are you ready to switch to the right investment vehicle for your changing circumstances?