How The Super-Rich Manage Their Money

What’s the best part of being super-rich?

Having all that money.

What’s the worst part about being super-rich?

Dealing with all that money.

A net worth of, say,  $200 million comes with all sorts of obligations, chores, and emotional issues.  First and foremost is the considerable work of protecting and growing that wealth.  Then come the non-stop demands of administering the fortune, and all that goes with it – bills, taxes, houses, cars, planes, charity commitments, family disputes.  It’s like a full-time job!

How do the wealthy handle all of this?  They don’t.  They do what many of us do – they hire people to handle it.  Of course, that arrangement looks just a little, teensy bit different for the wealthy.

The Family Office

Many “high-net-worth” individuals, defined as those with upwards of $2 million in investable assets, have a team of professionals who work together on the full range of money matters, from investment management to taxes avoidance to estate planning and other legal issues.  The squad typically includes an investment advisor, CPA, lawyer and private banker to handle business at their financial institution.  (You won’t find any high-net-worth folks at the bank drive-up window at 5pm on payday.)  With the exception of a private banker, you likely have a similar team of pros in place.   Rich folk just keep their guys a lot busier.

Related: [Podcast] Putting Together Your Financial Dream Team

The super-rich often take the Team Money concept a big step further by establishing a family office, a private firm that manages just about every aspect of life for the family.  In addition to the tasks listed above, the family office often manages home and vacation properties, vehicles, charitable giving, trust-fund disbursements, children’s allowances, and art or wine collections.  Family office staffers can even mediate money-related disputes between family members.

This level of skill and attention doesn’t come cheap.  A family office can cost about $1 million per year, according to The Wall Street Journal.  That kind of expense only makes sense for the 5,000 or so U.S. families with $100 million or more in assets.   In recent years several financial outfits have debuted “multi-family offices” operations that serve anywhere from several dozen to hundred families in the $20 million assets range with a slimmed down version of the family office focused largely on asset management.

High Risk/High Reward

Of course, the money ninjas in a family office aren’t paid to review monthly 401k statements and balance the checking account.   The very wealthy tend to have somewhat more complex portfolios.  Just like you and me, they strive for diversification and a balance between risk and security, growth and preservation.   As part of that strategy, they might be invested in some of the same income or growth stocks, ETFs and mutual funds that we hold.  Often times they are focused not on “hot” stocks but those that have shown stability and increased dividend payouts over many years.

Related: Ashely Asks A Question - Why don't people invest all their money in dividend-paying stocks?

But the super rich also have access to higher risk/reward opportunities that demand careful vetting and oversight -- private equity placements, venture capital opportunities, hedge funds and angel investing.  The only money you put in such investments is money you can afford to lose.

Other complex investments, such as a family business, art or real estate might also be in the portfolio.

Trust in Trusts

Being rich makes you a huge target for everything from taxes to scams to frivolous lawsuits.  That’s why the very wealthy often don’t legally own anything.  Instead, their assets are held by trusts.

A trust is a legal arrangement in which a third party holds the assets of the trust beneficiary.  Trusts can be expensive and require some effort to set up, but they offer many potential benefits, including:

  • Protection from creditors, lawsuits, and other claimants during your lifetime.
  • Avoidance of estate taxes.
  • Avoidance of probate court with its delays and public disclosures.
  • The ability to closely control the when/how of distribution of the estate’s assets to heirs.

There are several types of trusts, each with its own set of benefits and requirements.  While trusts are a favored tool of the wealthy, plenty of regular folk employ them to address specific life issues.  A buddy of mine, for example, used a trust to protect the assets of his new family from a vindictive ex-wife.

Related: Estate Planning Basics

See?  You have more in common with the super-rich than you thought.  Regardless how big or small your net worth, you’ve got to handle your business and plan for the future -- sometimes with the help of a professional or two… or 30.

Reminds me of the supposed exchange between legendary writers F. Scott Fitzgerald and Ernest Hemingway.

“The rich are different from you and me,” wrote Fitzgerald.

“Yes,” replied Hemingway.  “They have more money.”

Do You Need A Will?

buy me pizza Who needs a Will?  Well, it is always important to have some sort of an estate plan in place.  The reason is because unforeseen events do happen regardless of how young or healthy you may be.  With that being said, though federal estate tax planning has become somewhat a thing of the past due to the $5.45 Million personal deduction and double that for a married couple, most individuals should, at least, have a Will in place, along with a Financial and Medical Power of Attorney.

The reason for this is that the relatively small cost of constructing these legal documents greatly outweighs the costs of not having them in place if/when they are needed.  A Guardianship or Conservatorship proceeding in the case of sudden incapacity, or administering an Intestate Estate (dying without a Will), would all require more time, money, and effort, than constructing a very basic estate plan.  Of course, by constructing your own estate plan you also make your own choices, instead of a court, which will make them for you in the absence thereof.

Related: Estate Planning Basics

Who doesn’t need at least a Will?  The answer is not too many people.  You would need to be single, without any minor children, truly not have anything of substantial value, and if you have any property at all that you want your beneficiaries to inherit, not really care about putting whoever settles your estate through the more restricted intestate administration process.

Children understandably complicate this matter.  If you have children (from newborns to young adults) it is also important to have either a revocable or testamentary trust (trust in your Will).  If you have a sizeable life insurance policy or valuable assets of any kind, do you want your children to have legal ownership of such resources while they are college undergrads?  The answer is no (for at least 99% of readers).  Establishing a basic trust is a cost effective way to put restrictions on situations like this and to appoint a Trustee to responsibly care for your assets until your children are mature enough to inherit them.  You can place your assets, life insurance, retirement accounts, and anything else you want into this trust, or have them go into the trust upon death through the aforementioned testamentary trust.

Related: 70% Of Wealth Transfers Fail - Here's how to not let that happen to you

It is my belief that anyone with a diversified asset portfolio should at least have his/her estate plan reviewed upon major life events and changes in the law.  At such times, you should also always make sure you have designated the correct beneficiaries on your retirement accounts and life insurance policies (this is especially true if the event was a divorce).  Also, if you are a part owner in a business, the partners need to periodically discuss exit strategies in case of an accident.  Everyone should also consider whether any adult children need restraints on inheritance, as a trust would also include creditor protections.  In summary, estate plans should be (1) implemented (for those who do not have one), and (2) reviewed periodically, to ensure the plan accurately reflects your intentions.

Related: Entrepreneurs - Why They Need Financial Planning Too

Renovation: Does Improving Our Home Pay Off?

Part 5 of 6 of  Wela’s series on buying a house.  

I need the newest and greatest piece of technology.

I need to go to Europe.

I need these new Nikes.

I need a new pair of shades.

Have you ever found yourself making these claims or similar ones?

It’s part of our culture and part of our psyche to believe that we need something when it’s actually just a want or a desire.

Let’s play a quick game.

If you were to be given three things and you had to live off of just those things what would they be? Now, remember that you are not going to be able to get anything else… EVER!

What would you choose?

Maybe a good portion of you all chose some of the obvious, food and water. Possibly some of you chose shelter. Or maybe a car. Or some of you clever readers may have said money… very sneaky!

In reality we really only NEED three things: air, water and food. If we have these then we can live. Everything on top of these three things is gravy.

Many of us have been fortunate enough to receive more than just the three essentials in our life. However, now we’ve gotten so used to these extra things that they feel like needs now.

If we break everything down, though, our needs will always come back to these three things.

So, that whole conversation above was pretty deep… I get it. Don’t worry, the rest of this article isn’t trying to convince you to just live on those three things forever… I promise.

However, it was meant to show the constant struggle that our minds battle over need and want. We continuously believe that we need to spend our money on things that are just desires. And we become so convincing that we talk ourselves into believing that what we want is actually something we need.

We do this in all aspect of our lives.

Fair warning, with a house we can also find ourselves doing this quite often.


Sheltering our desires

We saved up for our dream house, and made the biggest purchase of our life.

The house is furnished, and we have been maintaining it for a couple of years.

We are bored!

It’s time to make some home renovations.

I can’t wait for the warmer weather.  My backyard needs something special. I need to spice it up for the warmer weather that is on its way.

You know what I need… a pool!

Have you ever had this thought process or one similar to it in terms of desire?

I mean I think that having a pool would be awesome. Actually that is something that I have wanted for years.

However, the real question is whether or not that large purchase will add incremental value to your house. Will you ever get the money back on the pool when you sell the house?

Or would it make more sense to get a new front door or replace the garage door?

The door or the garage seems like more prudent renovations as opposed to a pool. But they aren’t sexy. In fact, they are actually quite boring.

We want to go with the sexiest option. The one that fills that newly minted need. We need that pool, right?!

Too often we find ourselves leaning towards the desirable, more attractive house renovation before we go with the actual necessary renovation.

Again, we are great at rationalizing and convincing ourselves that we actually need that desire.


Separating emotional benefit from financial benefit

In reality we just don’t know if any renovation to our house is truly worth it.

Yeah, fixing a leaky ceiling or a damaged roof or getting rid of mold is worth it. Now what about an addition to the house or building out that new bedroom?

These are the renovations that we just don’t know understand what the true value is until we sell the house.

And most of the time we don’t accurately track whether or not a home renovation was worth it. We tell ourselves that it was, but we don’t write out how much our house was worth before the renovation, and then document the cost of the renovation. We then don’t track what comparable houses are worth without the renovation we just made and compare that to our house value over time.

This just doesn’t happen. Hell, I feel winded just explaining how to track it. It’s too confusing and too much work. So we default to just telling ourselves that it is worth it.

How are we expected to make a good decision on whether to make an appropriate renovation or not if we don’t have all the necessary information?

See that’s the problem. We can Google whether or not a renovation makes sense. We will then get a list of things that make sense and those that don’t. Some people say that a pool would add value while others say that it doesn’t.

In the end, we typically side with the emotional desires because of the difficulty to determine whether the renovation makes sense or not and because our emotions tend to overcome logic.

That means as we list out what renovations we want to make we will pick the ones with the highest emotional appeal. This obviously sits well for the pool guys!

I am going to end that today. We are going to look at the five best renovations and the five worst renovations. This is all based on real data.

Yeah, other people can argue against these, but the fact is that data speaks…  and their arguments are just opinions.


Take it easy

Before we get into the fun of seeing what is ranked the best and worst, we need to cover a few basics when it comes to home renovations.

First and foremost: get your budget right. Some of you may be laughing, I am! There is no way to predict the actual cost of any home renovation. What I mean by right, is don’t make the mistake of trying to budget to the exact penny. Create a buffer. Take whatever you think the cost will be and add a 20% buffer.

If you don’t even know where to start on cost for certain renovations use this great resource from ( The link provides you some ideas as to what people are spending in your area for different remodeling projects. They provide some guides on these projects along with some professional contacts.

Now you can get an idea of how much you need to save for this renovation.

Wait. Before you start the renovation some more research is necessary. How big are other houses in your neighborhood? What is the price of other houses right now in your neighborhood?

We want to be sure that the improvement that we make to our house doesn’t “over-improve” the neighborhood. Although you may find it sexy to be the best house on the street, it isn’t sexy to the resale market.

If you are going to add a new addition to the house that will make your house drastically bigger (500 – 1,000 square feet) than other homes in your neighborhood, then you may not get the return on this you desire.

If you will to need to price your house much higher than others on the street in order to get your money back for the renovation, you may be making a bad decision.

So, do your research to make sure that the renovations are actually helping you rather than hurting you.


What renovations provide a return?

Remodeling Magazine puts out an annual report on what home renovations (remodeling’s) are most likely to recoup their cost.

The best way to look at this is to break it down from a local level and then look at it from a national average. We will take a look at the most recent report from 2015. Here is the link (

The report looks at what the average costs of different renovations are in the particular areas (locally and/or nationally) and compare it to the resale value of the particular renovation.

The resale value divided by the cost produces the percentage recoup that we are looking at below.


Top 5 renovations


Atlanta   National
Renovation % Recoup   Renovation % Recoup
Replace entry door with steel door 101.1% Replace entry door with steel door 101.8%
Fiber Cement siding replacement 99.7% Stone veneer accent 92.2%
Garage door replacement 92.7% Garage door replacement 88.4%
Attic bedroom remodel 89.6% Siding replacement (vinyl) 80.7%
Siding replacement (vinyl) 87.6% Deck addition (wood) 80.5%

Bottom 5 renovations


Atlanta   National
Renovation % Recoup   Renovation % Recoup
Deck addition (composite) 57.2% Bathroom addition 57.8%
Bathroom addition 55.8% Garage addition 54.7%
Home office remodel 55% Master suite addition 53.7%
Sunroom addition 51.9% Home office remodel 48.2%
Backup power generator 49% Sunroom addition 48.5%


My takeaway from the above lists is that we are likely not going to get back our money for our renovations. The best way for us to have success at getting back our money from a renovation is to negotiate well.

This doesn’t mean just go with the cheapest contractor and use the cheapest materials because that won’t help. Rather, if you are looking to do one of those top five renovations or remodel activities then work hard to reduce the cost while not reducing the quality.

My second takeaway is that there is a drastic difference between the top five and the bottom five. So, making a decision with the bottom five loses much more money compared with the list in the top five.

Just some food for thought.


Project conclusion

Which would you chose: boring or exciting?

Easy question. Exciting!

Which will you chose: logical or desired?

Another easy question. Desired!

The outcome from the data we looked at would likely go against your answers to both of the above questions.

A sunroom, a new deck or remodeling the home office seems like a fun and exciting renovation.

Replacing the front door or replacing the garage door seems boring. Vinyl siding? Awful!

Those are boring!

Why do the logical things always seem to feel so boring?

It probably comes back to the need versus want dilemma. Needing air, water and food is boring. Wanting new Nikes, the Apple watch and 60’ inch TV is a lot more exciting.

We have to be careful when it comes time to renovating a house that we keep ourselves from getting trapped into believing the desires we have are actual needs.

We can see that it is difficult enough to earn our money back from the boring renovations. Thus, making a decision for that desirable renovation isn’t likely going to pay off. Actually we are going to be losing a lot more money.

Yeah, I am human and understand the need of wanting to enjoy your house. That can at times mean going with that desirable/exciting renovation.

But we need to balance these desires with those that make most logical sense for our house and our financial situation.

Yes, at times we may have to make that boring decision, but we will be financially happy later on.

How Much Money Do You Need For Retirement?

JP Morgan recently released their 2015 Guide to Retirement chart which we shared on the Wela and Wes Moss Money Matters Facebook pages. On both of these pages we saw that it clearly struck a cord with our fans. This particular chart tells you how to calculate how much money you should have saved for retirement based on your age and income level.

Taking a quick look at the chart, you might say, “Okay, I’m 35 years old and making $100,000, so I need to multiply $100,000 by 1.4. That’s a total of $140,000 that I should have saved (already). Good thing I started saving early and often”

An alternative ending to this might be, “Wait, WHAT!?! How am I already so far behind!?!”

According to Vanguard’s study released in 2014, How America Saves, their median participant retirement account balance was $31,396. The median participant age was 46 with an income of $75,000. According to JP Morgan’s chart, those participants should be clocking in with over $165,000 in savings already. That’s a difference of over $100,000!

Clearly there’s a disconnect between where the financial planning community says people should be, versus where people actually are.

Back in the real world, we’re seeing that most people are still struggling to save for retirement. According to a study released by the National Institute on Retirement Security in March 2015, 62 percent of working households between the ages of 55 – 64 have retirement savings worth less than their annual income. According to JP Morgan’s calculations anyone making above $50,000 a year should have at least three times their annual income saved for retirement by the age of 55!

In fact, this same study says that the median retirement account balance for households nearing retirement is $14,500. That’s truly terrifying!

Now after looking at both sides of this spectrum of savings, I have good news. There is hope!

There are plenty of surveys and financial planning articles that say that you’re supposed to have $1 million or even $2.5 million put away for retirement. While having either of these amounts would likely set you up for a comfortable retirement, the reality is that there’s no set number that everyone needs to reach for retirement. Just hearing numbers like this can be disheartening.

The real issue with retirement savings in America is that people are constantly bombarded with large savings goals that they “have” to reach to retire comfortably, so instead they just don’t save anything.

When doing the research for my book, You Can Retire Sooner Than You Think, I found that it was important for “happy retirees” to reach a minimum threshold of $500,000 in retirement savings. With that said, though, ultimately the real deciding factor in how much you need to retire depends on how much you need for spending each year once you stop working.

JP Morgan’s chart says that if you are currently making $400,000 a year while working, by the time you retire at age 65 you should have $6,640,000 in your retirement accounts. That’s assuming that during retirement you’ll still need 80 – 90 percent of that $400,000 forever.

What the chart seems to miss, is that by the time you retire you’ll hopefully own most of your larger assets outright; like your home, car, boat, and whatever else that you’re planning to enjoy in retirement. If that’s the case, then it’s pretty unlikely that you would need such a high percentage of your peak income year after year to be comfortable in retirement. It also means you don’t need to have that $6.6 million saved before retiring.

While I wish planning for retirement was as simple as following a chart, it’s better to actually know how much you plan on spending on a yearly basis in retirement. From there you can create your own retirement salary.

Sign up to become a free user of Wela, and work with one of our financial planners to calculate how much you need to have saved for retirement.

Don’t panic when people throw out crazy numbers in regards to what your nest egg should look like. Your own personal situation will have its own uniqueness with its own twists and turns. That’s why they call this personal finance, and why it will never be as simple as looking at a chart.

This article originally appeared at

The Generational Shift In Wealth From Baby Boomers To Millennials

A huge shift in wealth is occurring… and it impacts us all  

A monumental shift is happening.

Yeah, I’m telling you, it is huge!

It is going to lead to much more responsibility for a huge group of individuals.  But it should be one that pays off handsomely.

Are you a big fan of teasers?

Me?  Not so much.  I like to figure out the point or where someone is going with a story and move on.  The anticipation can be frustrating.

On the other hand, though, they can be really fun.  It leaves us something to look forward to.  It gives us a reason to work hard to get to the next stage or moment of our lives.

Does it change your feelings if you actually know what is at the end of the tunnel?  And all you have to do is wait?

It’s just a different type of teasers.  You have those that leave you guessing and then you have those that tell you everything, but just make you wait.

That’s when patience comes into play.  But the ones when you know what’s at the end of the tunnel allow for you to make necessary adjustments.

I’m a bigger fan of those teasers.  It takes some of the unknown out of the equation.  Unknowns always make things a lot more complicated!

Oh, yeah.  About that teaser I was mentioning before. Yeah, it is going to be huge.  Really game changing.

That shift I am talking about is a generational wealth shift.  The Baby Boomers are retiring, and they are doing so with TONS of moolah.

This isn’t one of those “oh what is going to happen” teasers.  It’s the “holy shit how do I prepare for this” type.

So, let’s answer that.  Come along for the ride.


What’s about to happen could be big… really big

So here is the scenario.

It looks as if the Baby Boomer generation is going to be shifting (passing onto heirs) about $30 trillion.  Yes, that is trillion with a “T.”

All that is looking to be passed along in some fashion.  But before you start moving into that new mansion, let’s look at history for a quick second.

The Boomers were expecting to reap about $41 trillion in assets.  However, given the flat market over about 10 years now they have only received about $11.6 trillion in assets.  That’s nothing, right?!

So, we can’t start counting our chickens as part of the younger generations.  Many of the Boomers are likely to utilize the funds while they are living.  To improve quality of life, enjoy grandkids and great grandkids—while also looking to give some money to charity.

Clearly it would be foolish for us to sit here and rely on the possibility of this money trickling down to us.  We have to make our own wealth, and make our own name for ourselves.

How I think about it (and “psh” me if you want) is that my parents provided me an ability to educate myself and taught me values and life lessons.  It’s up to me to enhance those skills to make my own wealth.  While it’s their duty to spend their hard earned money.

If they leave me anything, great!  But, if not, no hard feelings.  It was their money in the first place.  They spend and have spent enough on me already.



Preparation is necessary despite the unknown of what we may get

For us to be sure that whatever wealth is transferred to us will be put to good use, we have to start today.  Not when the moment occurs.

What does that mean?

It’s time to educate ourselves on personal finances.

Yeah, personal finance can be boring as shit (unless you’re reading or listening to anything on our blog, of course).  If we ever come into money, though, we need to know what to do with it.  If we wait until the moment we’re suddenly handed a large amount of money to figure it out, we will be doing a disservice to ourselves and to those who left the money to us.

Education is the biggest key.  We not only have to understand some aspects of personal finance, we have to understand our own situation.

This doesn’t mean that we have to become financial experts.  We have to learn how we want to consume financial information.  Along with whether we will want to go through this endeavor alone or with someone else.

If you don’t want to go through it alone, then how should we choose and utilize a partner?

Given the advancements in technology, the way that we consume educational materials or interact with those who can help is changing.  It’s time for us to rid the notion that we have to deal with our financial situation in the same manner as our parents.

The next most important thing is that we must begin to take action today.  We must learn about the ways to both consume this information and the options we can utilize to interact with those we want to partner with.

The reason that this is so key is that we don’t want to get to the day the wealth comes along and not have a plan.

Ah, a plan.  That may make your eyes roll.  It’s not a plan that has to be boring.  It’s a plan that you have to be comfortable with when that day comes.  Because if you don’t have a plan, then being taken advantage of is much more likely.

Think about my car blog a while back.  If we walk into a car dealership without a plan, we are likely going to get taken advantage of by the car salespeople.  Maybe not necessarily taken advantage of, but maybe pushed towards a decision less than desirable for us.

Begin educating yourself today and crafting parts of your plan.  It doesn’t have to be complete, but begin today.


The $30 trillion light switch

For those that are still rolling your eyes but are kind enough to still be reading, I’ll provide an example of what I mean.

If you were told today to go and run 10 miles, right now, what would you do?

Personally, I would look at you and tell you to get the heck away from me… because it ain’t happening.

Now there may be a small segment of people who feel that it will be easy breezy.  But I would have to think that the majority of us aren’t ready to do that right now.

Now if that person instead said, “Let’s build up to running 10 miles, and start by running around the block.”

If you had to run 10 miles, you’d probably prefer to build up to it rather than be forced to just do it. You have to build the endurance, get back in shape and do it in small strides.

That’s what I am suggesting we do in regard to the generational shift because the day that it occurs is like someone telling you that you have to run 10 miles before you can do anything else.

This is a difficult task.  Those who are able to run the 10 miles right away are equivalent to the people who already inhibit solid financial habits.

Of course, we can all sit here today and say we know that we will take action then.  We will begin to educate ourselves then… but come on, isn’t that a little late? Planning that once we have a sudden windfall of money will be the point we find a partner is like walking into a car dealership not knowing what we want or even if we want to buy a car.

So, start prepping for this 10 mile run… because you are in this to win it.  It is a once in a lifetime opportunity, so we surely want to deal with it the best way we possibly can.


Get to work; it’s what’s in the best interest of us all

Yeah, we may not receive the entire $30 trillion into our generation.  We are about to be the heirs to a large chunk of change, though.

The beauty of it is that we can utilize it to create a solid financial foundation for us and our heirs.  This is a pivotal moment in history.

If we don’t manage this shift well, then we are putting all the future generations at risk.  The Baby Boomers were the largest generation.  Now the Millennials have taken that title.  If we mess up this generational transfer of wealth it puts everyone else at risk.

Begin by getting your financial situation in order today.  Get a partner or educate yourself enough to where you are putting your education to work now.  This way nothing will have to change once the shift occurs except perhaps a little less pressure on your budget.

If you are preparing by living a financially sound life now, you won’t be pushed off path even if the generational shift doesn’t occur.

Don’t wait for others to choose your fate, create your own.