High Net Worth: What It Means to Be an HNWI

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    Lots of people use it Net worth – the number you get when you subtract your debt from your wealth – to measure wealth. But what number do you have to reach in order to become a high net worth individual, and what exactly does this status mean? Here’s what you should know.

    What is a wealthy individual?

    Most experts agree that a high net worth individual – or HNWI – is someone with between $ 1 million and $ 5 million in cash.

    However, there is no official definition. Financial institutions and corporations often set different thresholds for high net worth. Jovan Johnson, a certified financial planner and owner of Piece of Wealth Planning in Atlanta, believes that a net worth of $ 500,000 for high or an income of over $ 400,000.

    “Once you pass these, not only do you move into a higher tax bracket, but there are many other complexities involved,” says Johnson.

    Which assets make up a high net worth?

    As a rule, the high net worth is only based on. calculated liquid funds. These assets include money in a savings account, certificates of deposit, stocks, bonds, or anything that can be quickly and easily converted into cash. Property, plant and equipment – including homes, jewelry, and collectibles – are generally not included in the equation.

    “In the stock market, you get real-time value, where it would take a long time to actually review and value a work of art, or to be valued at a certain price,” said Sara Lovell, a CFP and co-owner of 21 West Wealth Management in Irvine, California.

    How does having high net worth affect your financial life?

    A high net worth opens up exclusive opportunities. Some banks and other financial institutions require a minimum account balance in order to qualify for specific products or services, such as: private banking and asset management.

    Another benefit for HNWIs is easy to save and invest more money, Johnson says. But that also creates complexity.

    “When you’re a high net worth individual, you usually need slightly more advanced techniques when it comes to estate planning and tax planning and investing,” says Lovell.

    Preservation of wealth, minimizing taxes and relieving the relatives who receive their wealth after their death are the focus for many HNWIs. To address these concerns, some seek help from a Financial advisor or other experts who can tailor strategies to your specific situations. Lovell says many of her high net worth clients have a “specialist finance team” that consists of an auditor, a real estate attorney, and a financial advisor.

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    How do you become a HNWI?

    Most people don’t have millions in wealth. To put it in perspective, that mean net worth of American households is $ 121,700, according to the latest Fed survey of consumer finance. This number takes into account the value of home ownership and other property, plant and equipment, which HNW does not take into account.

    “They have the middle class, which over time becomes the wealthy everyday millionaires. But that’s usually retired, ”says Johnson. “During the working years it is very difficult to reach this level to be considered wealthy.”

    High wealth can be achieved through high incomes, savings and investments, or through circumstances such as inheritance. To have minimal debt is usually also a factor.

    What is your net worth?

    Traditionally, net worth is calculated by subtracting all liabilities from all assets. High net worth is based on cash only. Enter your values ​​in the calculator below to find your number.

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