Even if you weren't born with it, building wealth takes time, patience, and discipline. However, you may need to use certain strategies that will help you get there faster.
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Learn: 6 genius things all wealthy people do with their money
According to experts, wealthy people use several techniques that are available to most people and that you can use too.
“Earn, save, grow, repeat,” said Sameer Shergill, co-founder of financial tech company Hybeam. “Building a business, like building personal wealth, is a marathon, not a sprint. By being disciplined and patient, you can weather the inevitable ups and downs, while also identifying areas of opportunity as they arise. You will be able to invest flexibly.”
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Think of personal finance as a business
According to Shergill, this means you have to focus not only on how much money you make, but also on how much you spend.
“At the end of the day, it's the bottom line, not the bottom line, that allows you to build wealth and invest for your future,” he says.
Next, regularly track and forecast your cash flow. It's important to understand where and how your money comes and goes and identify areas of overspending.
Spend within your means and reduce reliance on debt
Shergill says that in today's high interest rate environment, you should do everything you can to avoid taking on new or unnecessary debt. For example, if you have high- or variable-rate loans, especially credit cards or car loans, you should do everything you can to reduce your debt risk before making other investments, he adds. Ta.
Build your finance team
Wealthy individuals also have financial teams that include CFPs, CPAs, and attorneys.
“The key is having a group of experts you can rely on as your finances grow and become more complex,” says Jay Zygmont, CFP, Ph.D., and founder of Childfree Wealth. “When you're first starting out, you may be able to manage everything yourself, but over time, leveraging an expert can help you avoid the 'unknown unknowns' and optimization strategies that may be overlooked. You can protect yourself.”
Consider making the most of your Roth IRA
Although not tax deductible, capital gains are tax-free if you refrain from early withdrawals.
“Imagine starting at age 25, saving $6,500 a year for 35 years, and earning an inflation-adjusted return of 6% a year,” says Joel Griffiths, a former professional trader and economics researcher at the Heritage Foundation. talk. “At age 60, that Roth IRA will be worth more than $700,000 in today's dollars, and all capital gains income in this account is tax-free.”
Consider rolling over your traditional IRA account to a Roth account. You will pay federal income taxes on the IRA rollover amount, but future profits will be tax-free, he added.
take a long-term perspective
When we talk about a long-term view, it means having the patience to weather short-term market fluctuations and focusing on growth potential over years or even decades, says Berg Capital's chief investment officer. said Avis Berg, CIO.
For example, real estate can be a good example here, he said.
“Historically, real estate tends to increase in value over the long term, making it a good investment for people who want to hold onto their property for a long time,” Berg added. “Institutional investors often take a long-term view of their investments, and this approach can be very beneficial for individual investors as well.”
Berg added that patience can be an important factor in wealth accumulation. Avoiding impulsive decisions and staying focused on your long-term financial goals will pay off big over time.
He also pointed out that these strategies are not limited to the wealthy, but can be adapted to suit the needs and circumstances of everyday individuals.
He said, “By drawing from institutional strategies and applying these principles to your personal finance activities, you can increase your chances of financial success in 2024 and beyond.” .
effective tax planning
This is the cornerstone of wealth management for high-net-worth individuals, said Taylor Kovar, CFP, CEO and founder of Kovar Wealth Management.
This includes using tax-advantaged accounts such as IRAs and 401(k)s, as well as strategies such as tax loss capture, charitable donations, and trusts to minimize tax burdens, he explained. .
“Retail investors can also benefit from tax-efficient investments,” he said.
For example, maximize contributions to retirement accounts, consider the timing of asset sales to manage capital gains, and consider charitable giving to reduce taxable income.
Zygmont agreed, saying the goal is to save money on taxes not just this year but for decades to come.
don't stop investing
Rich people are crazy about investing and are still investing in 2024, but they're getting smarter.
“They're saying, 'Let's invest 60 to 70 percent in stocks, 10 to 20 percent in bonds, and another 10 to 20 percent in real estate and startups,” says CFP and Good Financial Scents. says Jeff Rose, founder of “That's diversity, my friend. And it's not just a story. Just look at the average annual return for the S&P 500 over the past 90 years of about 10%.”
Diversification
As Berg pointed out, one of the fundamental principles institutional investors adhere to is diversification. This is a strategy that spreads your investments across different asset classes to reduce risk.
“For everyday investors, this means not putting all your eggs in one basket,” he says. “Diversifying your portfolio with a mix of stocks, bonds, real estate, and alternative investments can reduce risk and improve long-term returns.”
Kovar also argued that diversification can be achieved through more modest means, and individuals could also consider low-cost index funds and ETFs to gain exposure to a wide range of assets.
“Real estate investment trusts (REITs) and mutual funds that focus on alternative assets can also be accessible options,” he added.
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This article originally appeared on GOBankingRates.com: 8 Strategies Wealthy People Are Using in 2024 — And How You Can Too
