There are many ways to increase wealth. And the wealthy know exactly how. They understand how to make the most of their money by taking advantage of everyday money transactions that we often overlook.
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“While these strategies are more prominent among high-net-worth individuals, they can provide insight for individuals of all wealth levels to make informed financial decisions,” said Howard F. Gold, Financial Specialist at Money4Loans. Mann said.
Here's a look at some of the ways they approach it.
Utilization of Roth IRA
“When you own a Roth IRA, you're putting in after-tax money and you don't have to pay taxes when you take it out in retirement,” said Mark Chen, founder and CEO of Billsmart. You won't have to pay.”
While most people can invest just a few thousand dollars a year in a Roth IRA, he says, the wealthy are investing in venture capital assets that are currently low-grounded but could be worth millions of dollars in a few years. He points out that the contribution can be significantly increased by investing in “Especially if they know it's going to happen.”
borrow using stocks
Ultimately, Chen says, most people become rich by owning their own businesses, not by salaries or bonuses.
“One of the ways rich people unlock their business wealth is by borrowing against their stocks, so they don't have to sell them and pay capital gains or ordinary income.”
Chen explained that the interest rates bankers usually charge when borrowing against stocks are very low, and when a business owner dies, the stocks are valued at their death value and the tax rate is much lower.
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Credit card points are unlimited
Chen said many wealthy business owners put their spending on credit cards because they want points, not because they need to borrow money.
“With these points, they can get thousands of dollars of free flights and hotels.” Just use your points credit card for shopping and get a 1-3% kick You will get back.
Moneyzine financial expert Jonathan Merry agrees. “Using credit cards for all expenses allows wealthy people to track their spending more effectively,” he noted.
“Rewards cards allow you to take advantage of cash back, rewards, and airline miles. Rich people know that every transaction they make with their card is an opportunity to earn valuable rewards.” Mr. Mary explained. “If you pay off your card every month, [and] You pay no interest and earn free points that can be used for luxury travel. ”
advanced mortgage strategies
Percy Grunwald, personal finance expert and co-founder of Compare Banks, points out that wealthy individuals often employ sophisticated mortgage strategies to take advantage of low interest rates. Masu.
“For example, you might choose an interest-only mortgage and invest the money you save in high-yield investments,” Grunwald said. This approach can significantly increase your wealth over time. ”
infinite banking
Grunwald emphasized that wealthy people sometimes take advantage of a little-known financial concept called “infinite banking.” Setting up a whole life insurance policy with a mutual insurance company allows you to borrow money based on the policy's cash value, allowing you to finance investments, pay down debt, and grow equity while maintaining tax benefits. can.
private investment
Wealthy individuals often invest in private placements that are not publicly traded. These investments offer tax benefits and higher returns.
“These typically require accredited investor status, but can provide unique opportunities to grow wealth,” Grunwald said.
Collection of loss
Wealthy investors are working to recover losses to offset profits and reduce their capital gains tax burden, Grunwald said. By strategically selling your investments at a loss and offsetting them with more profitable investments, you can minimize your tax expenses and protect your assets.
family limited liability partnership
Grunwald also said that “wealthy individuals often form family limited partnerships (FLPs) to consolidate and protect family assets.”
FLP facilitates tax-efficient asset transfers, reduces inheritance tax burdens, and provides a systematic way to manage and pass on assets to future generations.
Real Estate Investment
Melly says that once people accumulate wealth, many people jump into real estate investing.
“If you manage your basic finances and have extra cash, getting involved in real estate seems like a logical step,” he said, adding that investing in real estate comes with the benefits of stable income, rising property values. , pointed out that there are several economic benefits such as borrowing power and tax reductions.
Outsourcing and delegation
“Wealthy people know their strengths and make the most of them,” Merry says.
They understand when it is wise to hand over a job to someone more skilled. We also recognize when it's wise to delegate tasks to someone else to save time.
“This is where we differ from the wealthy,” he added. “For them, time is money, and the time they save by outsourcing is money they can make by prioritizing more profitable businesses.”
Using coupons and haggling
“You might not expect it, but I know a lot of wealthy people who still clip coupons and bargain to get cheaper prices,” Mary said.
He added that households with incomes of about $100,000 or more actually tend to use more coupons than households with incomes of less than $35,000. To help you adopt the habits of the wealthy, Mary recommends signing up for coupon platforms and checking local newspapers and online sources.
Buy in bulk
“My son lives with his mother in an affluent area, and he happens to know a lot of wealthy people, and they definitely buy in bulk,” said David Bakke, a financial expert at Dollar Sanity.
“They have a lot of cash, so they'll definitely buy three bottles of ranch dressing when it's on sale and three bottles of toothpaste when it's on sale,” he added. “At the sale, you'll see him with a 20-pound bag of rice in his cart. And a lot of wealthy people belong to clubs like Sam.”
amazon prime
Bakke points out that nearly all of the wealthy people he knows are Amazon Prime members.
“They shop online a lot because they like the convenience of shipping and free shipping on Amazon, and that says it all,” he said. “They also love all the benefits that come with Prime membership.”
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This article was originally published on GOBankingRates.com: 13 Everyday Money Transactions Used by Wealthy People
