How Young High-Earners Can Manage Their Wealth

My wealth management firm recently received a call for financial advice from a 27-year-old music producer. He's been in the entertainment business for several years, but after experiencing some recent success, he's now on the verge of receiving a large pay increase. Starting next year, his income will more than triple—jumping from approximately $75,000 annually to $250,000.

He realizes that his career may be about to skyrocket. Fortunately, a family member recommended that he create a plan for his new money so that's it not wasted. After meeting with him, we shared several tips to help begin to put a plan in place. Here are the key tips, which can be applied to just about anyone earning a high income in a variety of professions:

1. Get your emergency fund in place.

Everyone needs a rainy day cash reserve and the first place you should park your larger paycheck is in a savings account at your bank. Save enough to cover at least three to six months of basic living expenses. Then, at all costs, try not to touch this cash.

2. Pay off any credit card bills and student loans.

These payments can drag people down for years. Reducing this debt early on in life will open up a world of financial flexibility to you down the road.

3. Don't buy too much house.

It's tempting to purchase a house, even one that is larger than needed. But with a big house comes bigger monthly expenses—yard maintenance, property taxes, insurance, electricity bill and more. If your job or income situation changes, and you're no longer "making bank," a large house could become your biggest financial mistake.

If you want to buy a house, keep it modest and make the largest down payment possible, which helps lower the monthly mortgage payment. Keep in mind that it's normal to upgrade over time, but it only makes sense to buy a larger home once there is a steady stream of higher income—not with the first big paycheck you get.

4. Build a core investment strategy.

This means opening some basic investment accounts, such as an individual retirement account and a brokerage account, and putting money in those accounts each month. You'll be pleasantly surprised how quickly you can build your balance sheet just by saving each month.

Whether you invest in stocks, bonds, mutual funds or a certificate of deposit, it's important to have investments that are liquid. This young man and others with money will likely be approached by a limitless number of people asking them to invest in a private business opportunity. Have a plan for how much you're willing to allocate to these deals – and plan that this money will be tied up for years, or you may never get it back. Your friend's new business idea has a much different level of risk than Standard & Poor's 500-stock index.

5. Develop your financial team.

You need your own advisory board consisting of people that have "been there before." This group may consist of a mentor in your industry, your tax accountant or lawyer or another person who does not stand to benefit personally from your paycheck. Use this group as a sounding board for financial ideas if you don't have a trusted financial adviser in place. While focusing on a career, most people don't have the time or energy to fully vet all the possible ways to allocate their new financial resources.

Above all, don't lose sight of the opportunity to solidify your financial future at a young age, which not many people will ever have. Be smart about your money now, and it will pay dividends for many years.

Lisa Brown is a partner and wealth advisor at Brightworth, an Atlanta wealth management firm with $1.4 billion in assets under management.