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Money moves the ultra-rich are planning in 2021, and what we all can learn from them
CNBC Select spoke to TIGER 21 chairman Michael Sonnenfeldt about how members of his elite investor community are preparing their finances for the year ahead.
Being a high-net-worth investor can certainly shield you from the most dire financial conditions. However this past year hasn't exactly been easy on anyone, and nobody has remained totally unaffected.
Even the ultra-wealthy are having to shift their financial priorities amid the ongoing coronavirus pandemic and resulting recession, according to TIGER 21 chairman and founder Michael Sonnenfeldt.
If you aren't familiar, TIGER 21 is a peer-to-peer learning network for investors and entrepreneurs with between $10 million and $1 billion of personal net worth. Its 850 members live and work across the globe and connect both in-person and virtually to talk, skill share and ask big questions about the kind of legacies they want to leave behind.
TIGER 21 commits to confidentiality, but recently Sonnenfeldt agreed to detail how the members of his inner circle plan on navigating challenges and opportunities in 2021.
Below, CNBC Select shares the takeaways and asks what normal people can learn from how the ultra-rich are preparing for the year ahead.
Sonnenfeldt's predictions for 2021
Sonnenfeldt's members expect that work-from-home has already created a huge ripple effect that will impact the stock market and the real estate market for years to come — starting with a booming technological sector as companies rush to meet the needs of our era.
"Growth in the technology industry has maintained during the 2020 economic crisis," Sonnenfeldt tells CNBC Select.
He also predicts major changes in real estate. Many TIGER 21 members have opted to move to areas with lower cost of living now that they're not expected to show up to work in-person every day. This is pulling major traffic away from the bicoastal hotspots, New York and California.
"I think it's likely that the office market is changed forever," says Sonnenfeldt — something for commercial real estate investors to keep an eye on. He expects a lowered demand for office space now that so many in-person operations are closing up shop.
On the residential side, however, historically expensive cities are more attainable than ever before. If you dream of living in New York City, now might be the time to buy an apartment, or at least take advantage of reduced rent.
"New York City and London have gone through ups and downs over 200 years," he says. "You could buy at a huge discount because the market is down now."
It's a long-term strategy, but one that could definitely pay off if you can afford to be patient: "New York City will eventually come back, we just don't know whether it's two years or five years."
How you can prepare your finances for the year ahead
There's no doubt that times are changing, perhaps more rapidly than anyone saw coming. Everyone, at all income levels and net worth, have had to make adjustments.
Taking a cue from Sonnenfeldt's book, it's important to stay nimble and look for ways to roll with the changing tides. This means reducing your cost of living as much as you comfortably can (yes — even millionaires do it) and rethinking the financial plans you made before the recession hit last spring.
Ask yourself whether last year's goals still make sense today, and see if there are other opportunities you might have not considered before that are actually more appealing in these new conditions.
Buying a house, for instance, may have been a distant goal in the past that feels right today given the currently low interest rates. And if you're saving gas money by skipping the commute, it might be worth putting some of that cash into a high-yield savings account, or even a CD, so you can earn a little extra interest on it while we adjust to the new normal.
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As we adjust to the new economy, keep your eyes open for both opportunities and challenges. Utilize the resources you have available to you, including any stimulus money, while spending conservatively, reducing debt and finding ways to grow your savings.
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