5 Things Rich People Do With Money — That You Should Be Doing

There are a lot of things we can learn from rich people about how they handle their money.

According to a recent survey by U.S Trust, very rich people  — I mean those with at least $3 million worth of assets that are investable — when it comes to financial management all have a lot of things in common. Financial advisers have said that you should consider doing these five things like most rich people;
1.      Delay Gratification
Investing in long-term goals, curtailing and reducing funding of current needs and wants is very important says eight out of ten high net-worth investors. According to financial analyst Greg McBride, you should delay gratification and also have the ability to delay gratification because if you always spend before you try to save what is left of the spending then you will almost always find nothing left.
For example: If, instead of spending $100 you save it towards your retirement every month — at the end of 20 years, let us assume a 5% return rate you would have approximately $40,000. On the other hand, if you had spent that $100 every month instead of saving, you would have missed out on a lot of money. However, not everyone can ignore their current need and wants and so not everyone can heed this advice. It is crucial that you understand the difference between needs (food, clothing, shelter etc.) and wants (which most times involves luxury).
2.      Use Credit Strategically
A study by the U.S Trust showed that, two out of three high net-worth investors consider credit a good wealth building way, while four out of five high net-worth investors say they know how and when to use credit to their financial advantage. It does not mean that this strategy is risk free because it is not but you should know that credit can be expensive and savvy individuals can take this advice to heart.
According to Greg McBride, consumers can do this in a number of ways including earning perks, cash and reward cards for their shopping after paying off their credit card balances in full every month. McBride also said that instead of rushing to pay student and mortgage loans (assuming they are low-rate, fixed loans), consumers should pay them down on schedule and then shore up their retirement funds with that extra money. In so doing, you would be using the money that the government and the bank loaned you to fund your retirement. (Of course, you must make the payments required on these loans.)
3.      Use a Long-Term, Buy-and-Hold Strategy
85% of high net-worth investors say their biggest investment profits were made through long-term buy and hold strategies (buying investments and holding onto them for many years). They also said they did this mostly by using traditional bonds and stocks, with 89% of high net-worth investors saying they prefer this approach. Even Warren Buffet has espoused that it is a tried and true advice last year, when CNBC’s “On The Money” hosts asked him what investors should do when they are worried about severe market fluctuations, he said that investors should not watch the market too closely because the money is made by investing and owning good companies for long periods of time. He added that buying and owing good companies over time, is good investment because in 10, 20, 30 years from now they would be doing fine.
4.      Make Tax Conscious Investment Decisions
The U.S Trust study concluded that more than half of high net-worth investors agree that factoring in tax implications in investment decisions is better than disregarding tax implications and pursuing higher returns. According to McBride, this is because net pay which is the amount you would net after taxes is what really counts. What’s more? Experts say that you might have to give up 40% of your profits every year if taxes on your investments are managed badly.
Investors should listen to financial advice and save money in flexible spending accounts or even use tax advantaged plans like a 401(k) or IRA to save for their retirement or save for their child’s college in a 529 plan.
5.      Invest in Tangible Assets
Almost half of high net-worth investors said that they have investments in farmland and real estate which are all tangible assets that grow in value as well as generating income over time. Real estate as an income source and diversifier has lots of merits; to a well-rounded portfolio it is very valuable. However, According to the CEO of Wealth Consulting Group, Jimmy Lee, a person’s asset allocation and also assets used by persons beyond bonds and stocks should be a customized decision, “For example, if a person owns lots of real estate it would not be advisable to buy more through them.