Even high-net-worth people are worried about their spending.
Alberto E. Rodriguez/Getty Images for Veuve Clicquot
  • Wealth and freedom of choice go hand-in-hand: The more money you have, the more choices you have.
  • But once you've reached a comfortable level of wealth, your spending should align with your end goal, and there are only four options, according to a forthcoming guide from Merrill Lynch.
  • The guide asks people to decide what they want to do with their wealth: Do you want to spend your fortune, maintain the current level, preserve its buying power, or grow it as much as possible?

Wealth is often equated with freedom: The more you have, the more choices you're able to make.

But even high-net-worth people fret about their spending.

That's according to New York Times writer Paul Sullivan, who in his latest column reports that Merrill Lynch's private banking and investment group is developing a guide to help wealthy clients manage their cash flow.

The guide, which Sullivan says will be released this spring, defines various spending priorities, from mortgage payments to charitable donations to impulse buys. Understanding all the ways in which money is spent today is an essential step in planning for future wealth.

Most importantly, it asks people to decide what they want to happen to the wealth they've already built.

"There are only four choices: Spend it down, keep it at the current level, preserve its buying power by having its value keep up with inflation, or spend or invest it to grow as much as possible," Sullivan wrote.

"Deciding how to decide is really important," Valerie Galinskaya, director of the Center for Family Wealth Dynamics and Governance, told the Times.

The guide is handy regardless of net worth level. If you're choosing the option to grow your net worth, whether you want to hit the $1 million (R13 million) mark or the $50 million (R691 million) mark, the same principles apply. Aiming for a more precise goal allows you to fix current spending to make that happen. Even if you can technically afford something, the question becomes whether or not you should be buying it.

As Sullivan wrote, "increasing wealth while spending heavily is difficult without additional sources of income. If a portfolio grows at 5% a year, for example, but inflation is 3% and taxes are 2%, there isn't a lot of room for spending if you want your net worth to grow." It's the people who recognize this simple fact - and adjust their spending accordingly - who become millionaires and billionaires.

Chris Hogan, the author of "Everyday Millionaires: How Ordinary People Built Extraordinary Wealth - and How You Can Too," surveyed 10,000 American millionaires for seven months, and found many of them live on less than they make and exercise discipline when it comes to budgeting, Business Insider's Hillary Hoffower reported.

"Millionaires don't accidentally live on less than they make," Hogan wrote. "They do it on purpose, because they have a plan. They're deciding. Living without a budget, though, is the very definition of sliding into misfortune."

It starts with identifying your values: Do you want to set your children up with a seven-figure nest egg? Do you want half of your fortune to go to charity? Do you want to stop working and spend retirement traveling the world?

The answers to these questions will eventually lead to choosing one of the four options.

As Lee Miller, regional director of the New York office for Glenmede Trust, told the Times, "If there isn't a driver to do something else, you really don't need to make any changes. It's all about learning to make choices.

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