5 Things Wealthy People Do at Year End (That Most People Don’t)

There are five things that wealthy people review at the end of every year. And most people, they don't review any of them. The difference with people who build wealth and the people who struggle, it isn't luck, it's habits. And these five year end habits can completely change your entire financial future. Hey everyone, welcome to the channel. My name is Rich McCormick. I'm a certified financial planner. I've been a financial adviser for over 20 years. And when you've been working with people for that long, you start to recognize patterns. And one thing that I've definitely realized over the years is that wealthy people, they are very intentional in tracking their numbers and planning out their goals in making sure that they are hitting certain metrics each and every year. While middle class families, even though they might have big incomes and they feel like they're doing well, they are not intentional at all. As a matter of fact, they tend to hide from the numbers. They don't want to look under the hood at what is going on in their financial life. And that is one of the big difference that really separates people. It's not about luck. It's about habits and making sure that you are taking the steps necessary to build wealth and make smart decisions around your finances. So, in this video, I'm going to go through five year-end metrics that I always see wealthy people tracking, numbers that they are looking at, making sure that they are planning around these five things each and every year. I hope that you found this one helpful. Let's get to it. All right. So the first thing, and I talk about this so much that if you follow my content, you might be sick of hearing me say it, but that is tracking your net worth. Wealthy people look at this as their scorecard. Are they going in the right direction? What is causing that number to go up or causing that number to go down each and every year? All a net worth statement is, it is your assets, things that you own. So, your home, cars that you own, real estate, any investments you have, money in the bank, savings accounts, stocks, bonds, IAS, 401ks, all of your assets that you own minus your liabilities, which is money that you owe to people, your mortgage, car loans you might have, any personal loans, credit card debt. You take your liabilities, you subtract them from your assets, and that gives you your net worth. That is your scorecard. the last day of the year or the first day of the following year, that is a great time to go ahead and punch all the numbers in the spreadsheet and keep them year in and year out. This way, you could track what your life has looked like, what your financial road map has been over the course of your life. I've been doing this for over 20 years, and it is great to go and look back at my journey throughout my life with my finances, where I was and where I am now, and it tells a story as you go along. So, start tracking that as soon as possible. Wealthy people are obsessed with net worth. Not with their income, not with their expenses, even though those things are very important. It is their net worth that really matters at the end of the day. All right. And then number two is your savings rate. And wealthy people look at this not only as a percentage, but also as a dollar amount. So they want to know how much of my gross income am I saving and investing for your future? And they know the secret to all of this is that what I call the happy gap. The difference between the money that they bring in and the money that goes out for expenses and for lifestyle. The gap between there, the wider it is, the happier you are because you are taking that money and you are investing it for your financial freedom for your future. And when I say percentages, I'm talking about what percentage of your gross income are you saving and investing. So, for example, if you make $200,000 a year, if you're married filing joint, $200,000 a year is your income and you are saving $20,000 a year. That is a 10% savings rate. Now, some simple benchmarks, 15% savings rate is solid. If you could do 15%, then you are on a good path. If you could juice that up, do 20 25%, now we're getting into the ballpark of being able to retire early. If you could save 30 35% then we're talking about the FIRE community, right? Financially independent, retire early. And one thing that is constant with wealthy families is they automate this stuff. They know their numbers. They know how much money they are actually able to save every month and they automate it. The money is automatically going to their retirement plans, to their emergency fund, wherever they're sending that money. They don't want to have to think about it. They want it to hit those accounts before it hits their bank accounts where they're able to go ahead and spend that money. And then another common trait with wealthy people is when they get year-end bonuses or they get bumps in their income, that money, it's not divvied up into their expenses. That money is going into investment accounts. They look at that as an opportunity to get ahead. Let me take this money that I'm not dependent on month in and month out and throw it into the market into investments. Help me reach my goals. All right. And then number three is investment returns and asset allocation. I have found that wealthy people, they know how much money their money is earning. Are they investing wisely? What is their asset allocation look like? Are they invested for growth? Are they diversified? Most wealthy people, they have many different types of assets. They might own rental properties. They might be self-employed where they're have a lot of money tied up in their own business. They might be investing in other small businesses. And then they have a big portfolio of stocks, bonds and mutual funds. So they are very well diversified in their investments just in case we do have a big downturn in the economy. They understand their risk levels and where they are vulnerable in case we really do have a big downturn. Even with my very wealthy clients, they're the ones reaching out to me, how are we doing yearto date, what is our performance look like? What is the asset allocation? What should we be doing? They are on top of this stuff. They want to understand and know how is my money performing because it is so important to the long-term growth of this money. They don't want to settle for 3% rate of return in the money market account. They want their money working for them so they don't have to work that hard and they could eventually stop working. Wealthy people also have a general understanding of the markets. They're not following it each and every day and trying to pick winners and losers, but they do understand that long-term markets tend to go up and investments appreciate and they stick with that. They don't panic when things start to get a little bit dicey. They're not running for the hills if some bad news comes out or we have a an event that's outside of our control. They understand that markets go through cycles and it's an opportunity to add money when things are going down. But on the other end, they also want safety. They don't want to be in a position where they could just get clobbered and lose 50% of their investments. They do want some stable, secure income sources, especially going into retirement. But overall, wealthy people, they don't obsess about the daily movements of the market and the economy. They take a long-term view. They place big bets on trends and things that they think are going to do well over time. And then they are patient and they let those investments pay off. All right. And then number four is tax optimization. Wealthy people, they are always looking for ways to reduce the amount of taxes that they pay. While most middle-ass families, they have no clue how much they pay in taxes. All they are worried about is, am I getting a refund back come April when I file my return? But wealthy people, they are looking for ways to actually reduce the dollar amount of taxes that they pay. The lowhanging fruit, they make sure to always take advantage of that. things like maxing out retirement accounts, 401ks, IRA, HSA accounts. But then beyond that, they are looking at starting small businesses and investing in small businesses where there are opportunities for tax deductions and where their income is taxed more favorably than when you're working at a W2 job. They're always looking at things like tax lost harvesting and trying to take those losses during the year or when it might make sense to do Roth conversions and fill up lower tax brackets. They understand the tax code, not in and out, but they have a basic understanding that, hey, I want to be paying less taxes whenever it is possible, right? I never want to pay more taxes than I'm obligated to to the US government. I want to keep as much money as I can. What strategies are there for me to be able to do that? And then they research those things and then they're not afraid to make investments in those types of assets that could actually reduce their overall tax bill. And even things like understanding tax diversification, why it makes sense to take a tax deduction now in a higher tax bracket as opposed to doing all Roth when you're in a high tax bracket and how it might look like in retirement, how you could fill up those lower tax brackets with distribution and then have some tax-free money on top of that in Roth accounts and assets that might get taxed a little bit more favorably. But overall, wealthy people, they're not CPAs, but they rely on CPAs and they rely on financial professionals and they're always looking for advice and strategies on how do I lower my tax bill, the amount of taxes that I am paying each year. And then number five, one thing that you always find wealthy people doing, especially this time of year, is goal planning and projecting the future. Every year, wealthy people are reviewing what goals they achieve that year, what goals they have coming up in the next one to three years, what their spending looked like for the year. Most wealthy people, they could tell you exactly how much money life cost them throughout the year. Where middle- class people, for the most part, they have no idea how much life cost them. They just know that it was a lot. Wealthy people ask themselves important questions like, "Am I living the life that I want to live? Am I spending on things that are actually important to me? or do we have waste on things where maybe we're just trying to keep up with the Joneses or just spending money on things that might not really be that important to them and reassessing this stuff constantly. Then they start asking themselves, what changes can I make next year? How could I be more intentional with my money? How could I live the life that I really want to live while also at the same point still saving for my future? What goals do I have? What are my long-term goals, my 10 year plus goals? What are my short-term goals? What do I need to fund in the next 12 to 24 months? What about my midterm goals? What are my highle goals? Do I want to maybe buy a vacation home down south 7 years from now? How do I plan for that now? What steps do I have to take to be able to do that? This is the mindset. These are always the questions that wealthy people are asking themselves where for the most part middle class families, they're just flying by the seat of their pants. They're just trying to make it through the year, right? And then figure out, all right, how do I do it again next year? Keeping my head above water. It's just a different mindset. But now is the time. This is when you should be talking to your significant other, sitting down. What did we do this year? What did we achieve this year? What did it look like? What could we have done better? What goals do we have coming up? How do we go ahead and achieve those things? Great time of year to be talking about all this stuff. But wealthy families, they're doing this each and every year. And if you're not, that's okay. It's not too late to start. You can start today tracking all of these different things. And if you want help, you can always reach out to me. Head over to schoolofpersonalfinance.com. You could book a 20-minute meeting with me, an intro meeting, and we could talk about how we could get started working together on all of these different goals. I hope that you found this one helpful. Please make sure to hit that like button if you enjoyed this one. I will see you again in the next video. Facts.