What is a Wealth Transfer?

Wealth TransfersIn a nutshell, a wealth transfer is any event where you give your money to somebody else, regardless of the reason. Every time you spend money, whether it’s on a mortgage payment, car payment, utility bill, groceries, cell phone, gas, a movie at Redbox, etc… you are transferring your wealth to others. Many of these wealth transfers are necessary to our respective ways of life and, thus, unavoidable, and many are unnecessary and can be avoided, or at least minimized.

Throughout our income earning years a significant amount of money will pass through our respective hands. Every dollar that enters our individual households becomes part of our circle of wealth. These dollars may come from:

  • Owning your own business
  • Wages at your job
  • Investment interest & dividends
  • A garage sale
  • Selling something on eBay or Craigslist
  • An inheritance, etc…

What you choose to do with those dollars can have a significant impact on your current and future financial profile. During our income earning years we will transfer a lot of those hard earned dollars to the IRS, banks, credit card companies, mortgage companies, etc… Those wealth transfers can hinder your ability to improve your monthly cash flow and can be a huge obstacle to your efforts to save for the future.

Here’s the key issue with wealth transfers: If you spend a dollar you did not have to spend, such as paying more taxes than you otherwise could, you not only lose that dollar, but what that dollar could have earned for you had you been able to keep it.

leaky-bucketWealth transfers that can be avoided or minimized and aren’t act like holes in a bucket. And there are two ways to fill up a bucket that has holes in it: The first is to plug the holes and the bucket will fill up, even if the flow is a trickle. The second is to pour more in. Which of these two financial strategies do you feel the financial institutions have had you employing in your current financial position?

Since you may not have the ability to pour more wealth in the bucket in the future, it is imperative that you plug all the holes possible. Because the vast majority of Americans don’t understand how and where wealth transfers happen, our money trickles out of our wealth bucket and into somebody, or (perhaps everybody) else’s.

Ben Franklin said that even a small leak will sink a large ship, over time. If your bucket has 10 holes in it, how many of those holes would you like to plug?

There are many ways you can end up transferring your wealth unknowingly and unnecessarily. We find people tend to lose money in the following areas:

  • How they choose to structure and pay for their mortgage
  • How they choose to pay their taxes
  • How they choose to save for retirement
  • How they choose to save for higher education
  • How they choose to pay for their major capital purchases

Magnifier MoneyThe greatest impact you can have on your monthly cash flow, as well as your overall financial profile, is to identify any wealth transfers you may be making unknowingly and unnecessarily and take steps to minimize or eliminate them. We are experts at identifying unintended wealth transfers. We routinely improve our client’s monthly cash flow by hundreds, and sometimes even thousands, of dollars per month by finding the not-so-obvious transfers and doing just that, minimize or eliminate them.

If you would like us to help you identify the unintended wealth transfers that exist in your profile and devise a strategy and tactics to bring those dollars back under your control call us immediately to schedule a time to discuss your specific circumstances.

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