Many dream about what they would do if they had a million dollars. In the dream, this might come by way of an easy win on a lottery ticket or a large inheritance, yet for lots of Americans, it’s hard work, dedication and perseverance that allows them to reach that goal over time. However, once they find their net worth is at $1 million, they are often clueless as to what to do next.
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If you are on the path to reaching that great financial height, you want to make sure your next moves are strategic, so you do not endanger the wealth you’ve generated and, in many cases, can even continue to grow it.
Here are five things you must do when your net worth reaches $1 million.
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Understand What Your $1 Million Means
Kerry Keihn, a financial advisor at Earth Equity Advisors, stressed the importance of understanding how a $1 million net worth can take shape, as there are many forms.
“Is it primarily home equity, investment accounts or sitting in cash?” asked Keihn. “Real wealth isn’t just about reaching a number — it’s about how well your assets align with your financial needs and values. Understanding your breakdown is crucial for determining next steps.”
As an example, Keihn said, “If a large portion of your $1 million is in cash in a single bank account, you’ll want to ensure you’re staying within the FDIC insurance limits.”
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Invest With Purpose and Impact
Reaching this milestone is an opportunity to be intentional with your investments, according to Keihn.
Citing a US SIF Trends Report, Keihn said, “Many investors choose to align their portfolios with their values through sustainable, responsible and impact investing, a rapidly growing approach that now accounts for a significant share of global assets under management.
“This could mean investing in companies with strong environmental and social practices, excluding industries that don’t align with personal ethics or funding solutions to global challenges like clean energy and affordable housing,” Keihn explained. “Your investments have the power to shape the future — this is the time to ask: Do my investments align with my values?”
Beware of Anchoring Bias
“Anchoring bias occurs when we rely heavily on the first piece of information we receive and fail to adjust it as we gather new insights,” explained Keihn, noting that society often treats $1 million as the ultimate financial milestone without adjusting for inflation.
“The meaning of being a millionaire has shifted over time, but the term still holds a powerful allure,” Keihn added. “In reality, the impact of $1 million in net worth on your life depends on your financial circumstances.”
Keihn said the key is to focus on whether your portfolio can support your personal goals rather than arbitrary benchmarks.
Be Strategic About Taxes and Withdrawals
One thing to be aware of with a larger portfolio is that tax efficiency becomes even more important, in Keihn’s professional opinion.
“Investors should consider tax-smart strategies, like asset location, tax-loss harvesting, charitable giving — such as donor-advised funds — and sustainable withdrawal rates if they’re starting to draw from their portfolio,” she said.
Check In on Your Financial Plan
How well do you know your financial goals, especially after accumulating such wealth? Keihn explained that reaching that milestone is the perfect time to analyze your financial plan.
“Reaching $1 million is an ideal time to reassess whether you’re on track for the future you envision,” Keihn said. “Does this milestone mean financial independence, or are adjustments needed to reach your next goal? If you don’t have a formal plan, now is the time to create one.”
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This article originally appeared on GOBankingRates.com: 5 Things You Must Do When Your Net Worth Reaches $1 Million
