The ultra-rich seem to be in some kind of club of their own, almost as if they have secret access to a money playbook that the rest of us can never get. In some ways, this is true when you consider the access and connections they have that an ordinary person probably never will.
But the good news is that there is no magic formula to becoming a millionaire unless, of course, one happens to inherit it. But thousands of self-made millionaires have proven that you can start from scratch and reach incredible heights of success.
You may have just begun your journey to financial literacy and independence. Still, there are some brilliant things that wealthy people do with their money that have worked for them – and are entirely accessible to the rest of us “regular folk” too.
They Invest In Precious Metals
In the past few years, many people’s savings have taken a massive hit with the COVID-19 global pandemic, high inflation rates, supply-chain issues, and market disruptions. This is why it’s wise to consider and implement ways to protect your savings from the unpredictable. One way of doing this is by investing in precious metals such as gold and silver and diversifying your investments.
Since precious metals generally outperform other investments in a volatile market, they serve as a strong hedge during challenging economic environments. To put it into perspective, if you bought $100,000 in gold in 2000, your investment would have grown to over $600,000 today.
They Spend Wisely
While rich people are known to splurge on luxuries, not everyone does that. Plenty of super-wealthy people are concerned about where and how they spend their money. They think about what they want to spend on versus what they need, and although they have enough money in their pockets, they still look for the best deals.
Everyone should look for the best bargain, regardless of financial status. After all, given the hard work you’ve put into earning money, you wouldn’t want to spend unnecessarily.
They Employ Financial Experts
Earning money is one thing, but growing that money is a different ball game altogether. Wealthy people understand just how valuable money is and enlist expert assistance to handle it effectively. These professionals know a lot more about finances than we do, and they can help lay out a solid financial plan that is structured and updated with the guidance of a team of financial professionals.
For ordinary people like us, hiring a financial advisor might seem expensive. Luckily, there are some companies that match you with a suitable financial expert at affordable rates.
They Don’t Let Their Money Sit Idle
Have you heard wealthy people talk about being “cash broke”? Well, this doesn’t mean they don’t have any money; instead, it means that they never keep vast sums of funds dormant. They use the money-in, money-out strategy to ensure that the money is always working for them. Money sitting in a bank account only loses value over time, so they make sure to utilize it to keep growing their bottom line.
They Are Tax-Savvy
You can’t get—or stay—rich by giving away lots of money. Wealthy people take advantage of tax breaks and are savvy about lowering their taxes. They get favorable tax treatments by maxing out their retirement contributions, keeping track of charitable donations, and having assets like rental properties and businesses.
Moreover, they also receive extra income from capital gains and dividends that are taxed lower than earned income, further lowering the tax burdens on their beneficiaries.
They Plan For Expected and Unexpected Costs
We save for expected costs by setting aside a portion of our monthly incomes, such as saving money for college, buying a vehicle, or owning a house. However, there will be many unexpected things that are going to happen in our lives that we can’t hide away from. Wealthy people plan for these unforeseen expenses by discussing them with their financial advisors and peers. While most financial planners target six months’ worth of expenses for the emergency fund, wealthy people take it further by keeping as much as 25% of their money in cash and equivalents like Treasury Bills.
They understand that unexpected costs can disrupt their wealth, so they plan diligently to cushion their money should such an event occur. As they say, greed and fear are the most dangerous emotions when it comes to money, and you will not easily find the wealthy making irrational emotional decisions regarding their wealth.
They Understand the Use of Leverage in Debt and Insurance
Most people have a common mindset that they cannot have any debt, but wealthy people understand that the right type of debt can be favorable. When utilized properly, it can even grow your wealth to another level.
For example, Malcolm Forbes bought $70 million in life insurance in his 70s. On the surface, doing so at his age appeared absurd. Forbes explained that he had more money he could spend and that there was nowhere he could put his money that would give his descendants a guaranteed tax-free return. Therefore, he used life insurance as a great way to leverage his wealth for the next generation.
They Talk About Their Financial Plans with Their Beneficiaries
The smartest way to create generational wealth is by getting children and grandchildren to employ healthy financial habits. Wealthy people often have family meetings where they talk to their children about their estate, how money is managed, and the responsibility of having wealth.
Final Thoughts
Everything we’ve discussed above about the habits of wealthy people can certainly be adopted in our own lives as well. While it doesn’t guarantee that you will join the ranks of the super-rich, it can help to put you in a favorable position to leverage your potential to build and grow your finances. These are just some ways the rich become rich, remain rich, and grow even richer!
It’s also essential to keep increasing your financial knowledge. Billionaires don’t spend their entire days at board meetings or analyzing what stocks to buy; they also prioritize reading, researching, and learning more!
