Seven Bad Decisions Wealthy People Make with Their Money

PartnersInWealth offers the affluent insight into wiser financial management

HOUSTON--(BUSINESS WIRE)-- Wealthy people have more choices available in just about every aspect of life, from healthcare to vacations to what they buy at the grocery store. As a result, they have more opportunities to make bad decisions.

“The wealthy generally make poor financial decisions for two reasons,” says Jim Waters, founder and president of PartnersInWealth in Houston. “Either better choices become obscured by the sheer number of choices available or wealthy people spend their time in the minutia of choices and lose sight of what’s really important.”

Waters describes the seven bad decisions wealthy people often make with their money and offers insight into how to overcome them.

1) Family members are left in the dark about the finances. Often one spouse knows everything about the finances – accounts, balances, reasons for different accounts, insurance, nuances of deposits, spending, paying bills, etc. This leaves the less knowledgeable spouse vulnerable in the event of death, disability or divorce. Generally, neither spouse feels good about the inequity. Both should be informed.

2) Too many or redundant accounts make it more difficult to manage finances. Managing money ishard enough without added complexity. Take a closer look at your accounts and you may be pleasantly surprised with the opportunities consolidation provides. Consider this path: consolidation ? simplicity ? control ? peace of mind.

3) Insurance is usually with the wrong carrier. PartnersInWealth recommends that you consider changing your home, auto, personal articles and umbrella liability coverage from the big mass market insurers to specialized carriers that tailor their coverage to the unique needs of the wealthy. Most people make the switch after learning the differences.

4) Too much attention is paid to investments.Warren Buffett once said, “The stock market is designed to transfer money from the active to the patient.” Look at your investments about as often as you have the oil changed in your car. And here’s the key: put the same amount of emotional energy into both activities.

5) Charitable giving is haphazard and unfulfilling. Most wealthy givers donate based on obligation, personal relationships or whichever charity catches them at the right time. It doesn’t have to be this way. Charitable giving can be a fulfilling endeavor and there are some good tools that can help you align your money and passions. CharityNavigator.org is a good place to start.

6) Gifts to family members are often too late. Gifts to your children will do the most good and will be most appreciated when they are in their high consumption years between ages 30 to 50. But don’t give cash. Help them pay down their mortgage or directly pay your grandchildren’s school tuition.

7) The wealthy often work with the wrong type of financial advisors. When you reach a certain level of wealth you don’t need another investment manager, financial planner, banker or other traditional financial advisor. For many, a “Personal CFO” is the answer – a trustworthy and knowledgeable single point of contact you can count on. This is a financial quarterback who can help manage overall wealth, keep records, serve as a sounding board and coordinate the work of other financial advisors.

“If you’ve been blessed with an abundance of money, you know that from a financial management perspective that money can be a burden,” Waters says. “I encourage you to keep things as simple as possible and these seven insights may be a start to making you more effective at managing your wealth.”

About PartnersInWealth

PartnersInWealth is a fee-only, independent advisory firm offering advice and guidance to financially successful households. Founded in 2000, PartnersInWealth helps clients with comprehensive financial advisory services including investments, income and estate tax reduction, insurance, estate and philanthropic planning and asset protection. PartnersInWealth does not accept commissions and every decision is based on the interests of clients, without regard to compensation. For a unique approach to financial management, check www.partnersinwealth.com or call (713) 964-4028.

Pierpont Communications for PartnersInWealth Randy E. Pruett, 214-217-7300
[email protected]

Source: PartnersInWealth

Copyright:	Copyright Business Wire 2012
Source:	Business Wire, Inc.
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