Wealthy people do not just sit on piles of cash. That’s not probably how they got wealthy, and it is not the best way to stay wealthy. Instead the wealthy invest and save a bit differently than most. They utilize a number of money management tactics that allow them to grow investable assets.
For instance, many would think the wealthy are all about intangible investments, like stocks, bonds, etc., but this is not the case anymore. In fact, it is the tangible investments that can offer a better increase in wealth.
“Real estate continues to be a popular asset class in their portfolios in order to balance out the volatility of stocks. While it’s important to invest in these physical assets, they often scare away smaller investors because of the lack of liquidity and the higher investment price point,” Evan Tarver of Investopedia explained.
Knowing the money management tactics the wealthy utilize to increase their wealth can have value — literally. The following are a few worth considering if you want to grow your wealth like the experts. Let’s dive in!
1. Leverage Credit for Wealth Building
Credit is not simply for fun or emergencies. Credit can be a very good way to grow your wealth. In fact, many of the very rich leverage credit for financial advantages. For example, you can use the many rewards programs credit cards have to offer in order to build more wealth.
This seems trivial, but using your credit cards instead of debit or cash can have a serious impact on cash rewards or flight rewards. So instead of spending a few thousand dollars on your next vacation, you essentially get it for free by spending as you normally do.
The same goes for student loans and mortgage payments. Instead of rushing to pay those credits down fast, simply pay them on schedule and pile the extra money away in a retirement fund or index fund that very well could help you retire early. And more comfortably.
2. Take Up Philanthropy
Philanthropy is almost synonymous with the wealthy. There are always some type of charitable giving going on among the very rich. For example, Michael Bloomberg diverts over 10 percent of his money to charities, according to a Forbes article. Do they do this because they have big hearts? Yeah, probably some do, but there are other reasons as well.
Setting up a charity or sponsoring specific charities on a yearly basis can have big time tax benefits. These tax benefits in-turn help the wealthy grow their wealth. For instance, if you set up a donor advised fund administration, you can expect the profits from that charity to be tax-exempt. And you can’t take it with you either. Having an estate plan in place with a charitable bequest can have big benefits for your loved ones after you pass.
“A charitable bequest is a good way to leave monetary gifts for philanthropic organizations after your death or before you pass away,” a Cedar Rapids charitable bequests lawyer explained. “This bequest can also be used to reduce the amount of estate taxes that will be paid by your beneficiaries, since these types of donations are 100% deductible.”
3. Approach Wealth with a Long-Term Mindset
Wealth is not achieved in the short term, unless you hit the lottery or settle a lawsuit for a sizable amount of money. Instead it is achieved over time, often a long period of time. That’s why the wealthy have a long-term mindset when it comes to wealth building, and so should you. This means you will need to delay the wants and needs of now in order to grow your investable assets.
For example, let’s say you have the opportunity to spend an extra $300 per month on whatever you want. What would you spend it on? Most people would probably spend it on a new car lease, boat, etc., but this is not going to increase your wealth. Instead of spending that $300 on something that loses money over time, you can approach it with a long-term wealth mindset.
By taking that $300 a month and diverting it to an account that earns five percent interest, you can earn thousands more. There are also investment strategies that can grow that monthly investment larger with compounded interest. This can help you retire early, retire with more money, and be far more financially comfortable than your peers.
Wrapping Up . . .
The top three money management tactics to increase wealth are just the tip of the iceberg. There are a number of ways you can approach wealth building in order to ensure you’re financial prowess is looking good down the road. Have a wealthy mindset and set goals to achieve this year. What’s your top wealth building tactic? We want to hear from you.