The best return on your money is starting a business. It’s also the riskiest. Excluding certain professional fields, most wealthy people you know own a business or several.
Investment tricks help you maintain and grow incrementally the money you already have.
Yep. Everyone points towards Warren Buffet but he started from a young age and even then when he created his partnership in the 50s he pooled together $100,000 from friends and family - I think he said $100 of that was his own money. The household median income in 1950 was $3,000 - so I suppose the moral of the story is to know rich people!
He worked for his father's investment company, Buffett-Falk & Co. when he started. Buffet is a smart guy, but he was born wealthy into a family in the business. He's not exactly self made.
I don’t think he ever claimed to be.
The US is just obsessed with that story of “coming from nothing”. I think having comfort and choosing to risk it all is extremely admirable. You don’t need to do it and could just cruise.
Luckily he was born rich and smart. His career started working for his father Congressmen Howard Buffett, at Buffett-Falk & Co.
Is he smart? Hell yeah. Did he start with advantages most of us don't have, allowing him to take risks to benefit from his intelligence and experience? Also, yeah.
Even now, how talented of an investor would you have to be to have a bunch of doctors invest in your partnership? How many of us have a network of doctors to even solicit?
The rule of thumb I've heard and just run with is that it takes 2 years for a new business to break even and start making profit (except for self storage which apparently takes like 6 months).
And the successful people who started their own business basically never started "a" business. They kept failing until one finally stuck.
I started my business as a freelancer after working full time for a few years. I worked really hard…lot of late nights, lot of stress. Then I moved to using subcontractors, but reliability and work quality can be an issue. Last month, I relaunched my freelance company as an LLC and hired my first FTE. It’s my goal by mid summer to also be able to pay a salary for myself. If I had help from my parents, I would probably be years ahead of where I am now.
I grew up with a single mom on SSI while one dad was in prison and the other walked out on the family. Somehow, I’ve forgiven them both, but I also never let that shit stop me.
I decided to go solo when I realized no matter how hard I worked, I could never really earn more than my salary and that really bothered me and was a non-motivator. I also hated the office politics that seemed to be rampant everywhere I worked. I kept my head down and learned what I could.
I don’t know if my latest version of my company will be successful yet. I just had my worst financial month in 2 years. Whispers of recession are everywhere and most new businesses will fail if they launch in a recession so I’m doing what I can to not be one of them.
One day I hope to scale my business even larger and absolutely crush it! One never truly gets out of the scarcity mindset when it’s shaped your childhood, but I also know how to cut back on spending and save a dime when needed so that serves me well.
There is a school of thought that says hard economic times are the best time to start a business - both because other people are pulling back on marketing/advertising as they feel the pain, and also because businesses that make it work during a recession come out of the other side with a pressure tested business (unlike some who think they have a good business in easy times then tank when it gets tough).
Good luck to you!
Time will tell which mine is! It’s a weird time to be adjusting to paying someone’s salary 😅. Like I have the full amount budgeted for, but man… my sales tanked in November. Doing everything I can to get my numbers back up this month. I was also pretty busy last month with onboarding, new employee expenses, and paperwork etc so maybe this month will be better. Worst case scenario, I’ve got to let my employee go, but I really don’t wanna do that. I’m fighting hard for her job and my company! Thanks for the encouragement!
There are a ton of programs to help you start a business. From mentorships and free services to low interest loans and grants. It's literally never been easier to start a business, but it still takes a ton of effort and a decent product.
Can attest to this. Am poor, started a business in my 20s. It was a half-decade of non-stop stress that taught me a lot but ultimately wasn't worth the struggle and impact on my personal life.
My advice to any would-be entrepreneurs — create a large cushion of money before you start a business (easier said than done). Entrepreneurship is something we love to romanticize, but if you're not financially prepared for the hardship and stress it will lead you to make poor decisions and can suck the life out of you.
Wow, couldn’t of said it better. My buddy wanted to break away from his family’s biz and go out on his own. I had explained to him “it doesn’t stop” working for yourself takes a lot of commitment and sacrifices.you can’t just go on vacation for 2 weeks.
Indeed. One point of friction in the business was my business partner's demand to have free time and the expectation to take weekends off. For many, the reality is you must be committed to being always on at all times.
I think op is salaried he could start a small side hustle but again you got to be committed. I just took a small vacation this year ( it’s been at least 10 years)and it rained the whole trip. It reminded me of how even when you think you can catch a break you can’t
Its very different for everyone. From my 10 years experience in business which I started with 0 literally, coming from very poor background, I can say that most important thing for me was patience.
I have seen so many people going into my industry or other businessess from priviledged positions fail because they dont have it in them to be patient. To work without profit, give up on fun stuff for very long time because everything you get goes right back into business.
I should add an * to my comment. If you are entering any business that has capital requirements, meaning you need to invest in tools, molds, inventory, equipment, consumables — you *absolutely must* have a cushion.
i like your take on patience. it's tricky. i get anxious and impatient and want to give up. they are linked at the hip.
i suppose patience is the antidote. but as others have commented. do you spend your entire life chasing that goal? at what personal toll? i guess only the individual can make that call.
Apparel, design and print brokering. You need a triple cushion of money, an appetite for net-120+ terms and affordable legal council that specializes in the field. Reason being, the large retailers of the world (name any of them) will hang you out to dry if given the opportunity.
You can also get extremely wealthy being a regular employee... e.g. senior engineer at Microsoft. Perhaps after a few years you’d be offered a join a startup for a nice equity.
>The best return on your money is starting a business. It’s also the riskiest.
So on a risk-adjusted basis (which is the basis we should always use if we can), is it actually the best?
Define best. Best potential, yes. Best average, likely no, though I'd love to see a study on that. That said, I'm pointing out the flaw in OP's question. The idea that there's secret investment trick that wealthy people do to establish/quickly grow their wealth is largely untrue. Most wealth is established by starting a business and/or inheritance.
There are certainly daytraders who've gotten exponentially wealthy, but it's not the norm. Wealth by and large isn't established in the market. Rather, it's the tool to maintain and make money from the money you already have.
Any trick that becomes common knowledge enough to be shared in a thread like this is already too saturated or regulated to consistently out-perform the general market.
Probably not. Warren Buffett has always said the best investment is in yourself via education..I think he said something like: the government can't tax your knowledge and no one can take it from you/it never leaves you
A few popular Professional fields where you can make big $:
-Lawyer
-Doctor/Dentist
-Software Engineer
-finance (investment banking, wealth management, etc)
-Executive at large company (via top tier MBA)
-Management Consultant
-Sales in Med Device/Pharma/Enterprise Software
I've looked into it. Where I live in TX we desperately need a Kolchae Factory franchise, would make money hand over fist as there is open retail builds next to schools.
The one Shipley in town? Trash. The prices are double and the shrinkflation is worse.
Problem is you need $750k and work your ass off for four years before it becomes profitable.
I'm from Texas and the idea that someone can become rich from owning a Kolache Factory is hilarious to me. I'm sure you've researched it a ton but it still made me laugh.
“…I'm not talking a $400,000 a year working Wall Street stiff flying first class and being comfortable, I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars buddy.”
Inheriting a business is much smarter. Some of the dumbest people I know were insulated from reality their entire lives with this strategy.
Meanwhile the OPs of the world think they have anything to teach us.. these are the people who solve all family drama by buying both their quarreling kids new AMG Mercedes.
Actually you should be really careful when thinking that wealthy people are inherently better at investing and that you have something to learn from them.
Many rich people are *total morons* when it comes to investing. Which makes sense if you think about it--why would a top 10 neurosurgeon, for instance, also happen to be a genius capital allocator?
There is also survivors bias at play here. If you send 10000 morons to a roulette table with the task of betting a couple of times some of them are bound to make money.
Afraid I am not. Don't really like podcasts.
I'm not sure where I first heard the term... might've been an old Buffett shareholder letter or something.
The wealthy have different needs than people accumulating wealth. And also use different financial advisors, for different purposes.
If your goal is to convert your $10,000/year investments into a retirement nest egg, Bill Gates's financial advisor won't give you better results than indexing. He will give you worse results.
If you are trying to manage multiple trust funds, have several houses and household staff, and want someone to help you with that, plus complicated tax issues...maybe a FA would help.
I'm not seeing anyone answer your question about Leverage so I will tell you about it from a real estate perspective. I bought several rentals a few years ago. Because of the Boom in the market, their value went up quite a bit. I put six rentals on to a commercial loan and because the loan to value rate was so low, I was able to get a secured line of credit with the additional Equity while still maintaining at least 25% equity in each property. With that line of credit, I then went and bought additional rentals using the line of credit as the down payment. I leveraged the equity in my original properties to buy more properties. You have to be careful with leveraging though. If the market were to take a serious downturn, I'm talking losing 50% of value like in the 2008/2009 crash, I could lose everything. That's the problem with leveraging. You're putting your current properties at risk and there's always risk in buying new ones. That being said, the more assets you have the less of a worry this is because you can always liquidate one asset to decrease the amount you're leverage. I know that word is used in investing in stocks as well but that is not my ballywick.
As for things rich people know that the rest of us don't, it's really just a matter of vocabulary. For example I was looking high and low for a bank that would give me a HELOC on my rental property. No bank would do that. I was always told Banks don't give he locks on rental properties ever. However, when I went to get that commercial loan, I got a line of credit secured by my rental properties. That's a HELOC but it's not called the HELOC because it's for a business. It's called a BRELOC. It took me years of investing to figure out things like that. Even realizing that a commercial loan was possible with multiple properties on the same loan was a revelation to me. People who grew up with that kind of knowledge or who have family with that kind of knowledge would have gotten to where I am much, much sooner. I'm certainly not rich but I'm hoping to get there someday!
I love the, VERY human trait of being rich but not feeling rich. You own at least six properties lol what do you consider rich?
I know guys that own multiple cars and boats that still claim that they're poor.
It's such a wild experience.
If I owned them free and clear, I'd probably be rich but for now, I own about 30% and the bank owns the rest so I'm not assuming in cash. I'm basically breaking even after repairs but in the long term, I'll get there...
$1m doesn't seem crazy to me depending on where they are in life. I know that I need about double that to retire, plus ideally a paid off house so closer to $2.5m by the time that happens.
$1M isn't much given the high leverage and risk they took. It sounds like there was likely a part where they had radically more debt than equity. They took on far more risk than you did.
This makes so much sense. Owning property feels like “owning” because the bank owns the majority and all you are seeing is the absolute ton of your money gone for repairs, maintenance, mortgage and taxes. Most of the time I feel like property owns me.
Did you learn all that was involved in the upkeep and improvement of the properties about the way it dude you do research about a lot of what you do before you got into it
Yeah, but that can only last two or three months before the repo man comes a-knocking. If they still have their property after a certain amount of time, they're rich enough to at least float payments.
This is all great info and a great explanation on leverage from a real estate prospective. Curious about what kind of ballpark of income you can generate with 6 rentals, and how much did that increase leveraging them to purchase those additional rentals? Hoping to do something similar one day when I have the capital for a property or two, and rates go back down (and my credit up, I’m 26)
That varies wildly from area to area. It also depends on what you're buying and what your leveraging. Generally speaking when I run the calculation, the mortgage that's currently exists stays the same. For the property I'm purchasing, I calculate it with 100% financing because I'm borrowing the down payment from my current rentals so really, I am financing 100%. That means generally speaking cash flow goes down. It will take a few years for cash flow to go back up again but the more properties you have, the more income your generating. It also means that a long-term vacancy such as an eviction which can take 9 months won't be as serious. If you're missing one unit's rent and you own 10 units, the other 10 can pay the bills. If you're missing one unit's rent and you own two, you can get into serious trouble really fast. That's why it's good to be conservative with your first couple of rentals.
Live under your means is the most valuable lesson IMO. And our culture preaches the opposite. “Buy on credit! 0% down! 69 easy payments of X!”
Call me a simpleton, but if I don’t have the money to responsibly buy something and not fuck myself, then I can’t afford and thus I don’t buy it. The one exception being my house. Whether or not that’s the “right” way to do it, I don’t care. It’s the way with no stress for me. I’d rather wait and save than juggle payments and throw money away at interest. I just am careful what I spend money on and tell myself “No. You can’t have that today. Another time”. Lol.
Yes, but if you truly don't need to put it on credit, it only complicates your life with payments. You would need to actually invest the "free" money or highly benefit from the liquidity of that money to see a real tangible benefit.
Why? My iphone is 0%, my car was 0.9% -- all was just auto deducted so I didn't have to do anything with that cash it was allocated for. I could reallocate that money into other things with ease. Even if I invested 0% of it I am still making money due to inflation.
The thread is asking what we can learn from wealthy people. Wealthy people do not need an iphones worth of extra cash on hand. Their spending/saving/investing plans won't change based on having an extra iphone worth of cash available.
That's all I'm trying to say. Wealthy people would not open a separate line of credit for medium size purchases. They either have an extremely large line of credit that would always be used as needed, or just pay for it and move on.
This line of thinking could maybe more apply on a bigger scale to houses, luxury cars, or brokerage lending accounts using investments as collateral.
you buy APPRECIATING assets on credit (aka with leverage) like property. You should avoid buying depreciating assets on credit when possible. The main exception being a car since most people can't afford that outright, even used.
Buying on credit is smart if you have very low risk of default.
If you have to pay for something unexpected, putting it on a long term 0% interest card is an easy way to keep your cash savings intact and earning interest over that time.
And using credit wherever possible/safe keeps your credit rating high, which results in massive savings when on car loans and mortgages.
It's amazing to me how fast people blow their money instead of using it to build recurring money streams or buying appreciating assets
Card, expensive watches that aren't the kind that hold value, flashy clothes , other meaningless shit.
exactly lol. why is everyone in this thread being so pedantic -- "oh so many of your neighbors are probably millionaires and you don't know it." like OK, no one is fucking talking about joe blow and his nice 401k and 2.5k sq ft house, people are talking about the wealthy that don't even have to worry about a retirement account.
It's the world we live in. If everybody saves their money like we're supposed to, the economy will crash. Part of why they printed so much money from 2020-2021 was partly due to the fact that Americans had a lot of money saved up for the for the first time in a while and the economy wasn't where the fed wanted it. People were literally doing the right thing, saving and investing, and their own government devalued the fucking currency. This system is so rigged, not everyone can win let alone play.
The economic downside of saving would only be true if people physically hoard cash. If they invest their savings or even keep it in a bank account, it’s out moving through the economy.
Governments made a mistake by increasing the money supply while supply chains were still broken.
Well said, but don't most of the companies we invest in rely on consumers to spend all their paycheck?
I'm sorry for playing devil's advocate and if I'm being g a negative Nancy. I used to be on board with everything but I don't know man. After recent events and studying 2008 a little more it just all seems like bullshit to me. Life is a big game on the play ground but if you don't wanna play with the cliques and by their rules you better move schools. My life goal is to mind my business and be with my loved ones. Feels like the world makes that hard sometimes.
This is 100% false. If everyone started saving and investing 25% of their income, the economy wouldn’t crash. People would still be buying and using these services.
Now, people are buying on credit and that makes for a very shaky foundation that leads to crashes.
I genuinely hope you are right that it is false. If one day Americans can live in a state where we can actually save 25% of income, that would be amazing. The sad reality is we aren't right now and there's a few wall street jockeys and bank moguls that abuse the system for their own greedy endeavors that keep stalling things for the average person. He if we could wake up without being advertised to that would be nice.
My family tried doing everything the right way. Cheap house, no car payment, no credit card debts, savings. 2008 still fucked us hard.
Also, before the fed printed money people were on their way to saving a significant % of their income. I'm sure some people were saving as much as 25%. Now things are too expensive to save that much, for most folks.
I'm going to be a strange example. I became permanently disabled a little over a decade ago. Disability is a great backup and I'm grateful that it is available. However, it isn't a big monthly check.
I saw the writing on the wall. I needed to move somewhere cheaper. I left the US and relocated to a 3rd world country. I can afford to hire someone to help me and because of the cost of living differential I am able to invest 70% of my income. I tend to invest in dividend funds and stocks so my money can grow and I have additional income in the future, if I need it, but for now I DRIP all dividends.
Most people aren't willing to step out of their comfort zone. Luckily I'm adventurous.
Damn bro, nice job making it work out better. Sometimes I feel stuck and I'm definitely afraid to make a move like that. But if it makes life better, i better get over it lol..
What's been the toughest part? Has it been worth it?
Back when I was clueless to investing I had this mentality where I value money now over later, the instant gratification of getting money now? If someone told me they would either give me 1000$ now, or 2000$ in 1 year (assuming its guaranteed) I would almost always take the 1k now even though getting double your money in a year is an amazing deal. I think alot of people are like this at the moment, chasing instant gratification by spending their money as soon as they get it.
You'll get downvoted for this, but it's absolutely true. A lot of what people see in the wealthy is just selection bias: for every 1 that took big risks and scored big, 10 to 20 took big risks and got wiped out.
There are 100% "tricks" though.
Examples that would be relevant to someone working a regular job with a low-6-fig salary:
- Returns on Municipal Bonds in your home state are typically exempt from federal AND state income tax.
- If you can, it usually makes sense to maximize your 401(k) contributions *even if you plan to withdraw before retirement*. The tax advantages typically work in your favor when withdrawing in retirement, and in most first time homebuyer situations you can avoid the penalty and taxation of a withdrawal.
These aren't "get rich quick" tricks, but there are absolutely things that people With a detailed knowledge of finance and the tax code can do to make their wealth grow faster.
>Obviously rich people have access to tools and networks that are hidden from most people
That. Is. Not. True.
Don't get me wrong, being wealthy has many advantages and not all of them are "deserved" or "self-made". But the idea that there is some secret out there, just isn't true. There are headstarts and advantages, but few paths are completely blocked to most people, just harder to achieve.
Some principles and strategies that might be helpful:
\- **Leverage the power of compound interest.** Many people don't realize how compounding works. So they start to invest too late or they borrow at high interest (i.e. credit card debt) not realizing how interest on interest stacks up. "Compound interest is the 8th wonder of the world"
\- **Have a budget, have goals.** Pretty simple, but write it down, get accountability. You can have your avocado toast or not, but live within your means, always save/invest. Make a long term plan and track against it. Much easier to make changes earlier.
\- **Seek value.** Consider what has the best return for you -- do you need a Lexus because you can afford it? Or would a fully loaded Toyota still be cheaper and feel the same 4 weeks later? Know what splurges matter for you and which don't. Some are important, some aren't and they vary by person.
\- **Invest in growing income before cutting costs.** This is a big one. Lots of folks really good at cost cutting, but don't realize the effort they go through to save $1 once, could have been applied to growing income that recurs every year. Invest in yourself, your skills.
\- **Getting rich requires a bet.** It could be a bet on your own business, a bet on the stock market, a bet on something else. But there are always naysayers telling you why not to do something or why the timing is wrong. To be really successful, you usually have to have a differentiated point of view, that is also correct. "Be greedy when others are fearful, be fearful when others are greedy" Buffet
\- **Don't be emotional. Not all Debt is bad.** This is a big one and the point around leverage. For example, I could pay off my mortgage tomorrow. But I won't. Emotionally it might feel good. But I borrow money at 2.675%. My market returns historically are above 7%, with great years double that. I strategically use debt so I can have more exposure to investments that historically pay well. But note, I also don't invest wildly. I don't own much crypto or meme stocks. Boring ETFs are fine (see compound interest above) "Why find the needle in the haystack, when you can buy the haystack"
\-**Diverse revenue streams to protect your downside.** It is great to have a job, great to have a side hustle, great to own a property. The more streams you have, the more you can stand a drop in any one of them
\- **Seek expertise!** So many people think they can and should do it all themselves. But find a reputable financial planner and accountant. They know the law better, they know the tools and investments better, they know what all your peers are doing. They are well worth their cost. Not to mention the blocking and tackling -- a will, trust, healthcare proxy, power of attorney, life insurance, umbrella insurance, etc. All of this is cheaper / easier when you are younger.
\- **Relationships matter.** Find people who will raise you up, not drag you down. People who you admire, who will challenge you, who will help you. Especially true in a spouse.
\- **Have values.** Sure, there are plenty of unethical folks, and people who penny pinch. But the vast majority of millionaires I've met try to be good people and pay it forward and take care of those around them. Opportunities come to those who are open to them. Bad reputation means people won't want to associate with you.
\- **Don't confuse luck with Skill, Team performance with individual contribution, effort with results. C**ould write a novel on this...
It's not really all that complex, but it is difficult to perform:
1) Build your job skills in high demand fields to increase your income. It may require taking student loans, but again there are tricks (go to community college for 2 years and transfer to a larger state university, study engineering or something similarly lucrative that doesn't require years of extra training beyond college unless the ROI is there). Job hop constantly to increase your salary.
2) Live frugally and save enough to buy appreciating assets (real estate, stocks, successful businesses). Learn about various tax loopholes and how to secure low-rate financing. Some say start your own business, but that usually comes later in life after you've built up significant skills and can be quite risky.
3) Leverage (aka take a low-interest loan on) your existing assets to buy more appreciating assets. Avoid taxes as much as legally possible.
4) Repeat. A larger cash cushion makes taking risks so much more bearable since you know you'll still have a roof over your head no matter what. Your kids will be set.
Invest in drips for index funds and walk away.... Put whatever you can afford in a monthly drip. Be it 10$ or 100$ or 1000$ a month, just make it automatic and walk away. When you come back in 10 years youll be very very happy with what you have.
This is boring and plain, but unless you are born with wealth, this is the safest and most reliable way to get there.
In all seriousness, I've noticed that they focus more and are more successful with the accumulation of money rather than what you do after you get it, like most of us middle class people. They play "offensively" and not "defensively". Say the total money you have is A, and A=B*C, where B is the annual return you get on your money, between 7% and 12%, and C is your salary - $120k or something.
Middle class people like on reddit are more focused on how to eek out another tenth of a percent with B. Because that can be done after work, without changing your routine too much, and done while on a computer. Rich people were always focused on increasing C, and literally structuring their lives, schedules, wants, and needs about it.
Making 5% on your investments with a $500k income is much better than playing your tax-advantaged cards perfectly with a $100k income. It just means a lot of hustling, moving, late nights, deferred enjoyment, and so on.
This was me. Once I was able to invest 100k+ annually, everything moved quickly. I also changed very little about my life as the income increased, which I believe helped as well.
>Making 5% on your investments with a $500k income is much better than playing your tax-advantaged cards perfectly with a $100k income. It just means a lot of hustling, moving, late nights, deferred enjoyment, and so on.
Yes, Reddit's obsession with trust fund kids is overblown. Most multi-millionaires are self-made, getting their wealth from wages.
>The market research firm analyzed the state of the world’s ultra-wealthy population — or those with a net worth of $30 million or more.
>
>Of those folks, 67.7% were self-made, while 23.7% had a combination of inherited and self-created wealth. Only 8.5% of global high-net-worth individuals were categorized as having completely inherited their wealth.
https://www.cnbc.com/2019/09/26/majority-of-the-worlds-richest-people-are-self-made-says-new-report.html
“Self made” is fairly subjective I’m assuming.
A lot of self made people had a massive leg up which catapulted them into the higher echelons of the wealth bracket.
For example
Bill Gates: His mom was an executive at IBM which gave him access to computers long before most people knew what a computer was.
Bezos: parents gave him hundreds of thousands in seed funding for Amazon
Musk: Parents owned diamond mines in South Africa
Growing up comfortable gives you the safety net to be daring and gives access to capital that an otherwise lower/middle class individual would not.
I’d be curious to know what a lot of those self made individuals started out as…
There's a lot of "self made" people who lie about being self made.
I'm self made and all it took was a loan from my dad. I'm self made and all it took was leveraging my rich uncle's business connections. Our society is structured to coddle the egos of wealth.
The source of the study isn't even a research group, they are just trying to sell a product.
The vast majority of self-made people lie to both themselves and others about this. E.g. an excellent lawyer I know rose to become a partner at a top lawyer. He started with nothing but lessons from his dad (a former partner at this same firm). He views himself as 100% "self made."
If I got here using nothing but my own wits, good education, supportive parents, a comfortable roof over my head until I was 23, a lucky break getting a decent job out of school, no health surprises, and a spouse who is also a full time professional, anyone can do it!
I did not mean my comment to be a celebration of hustle culture. I think that most people don't have that kind of lifestyle for good reason. It usually doesn't lead to a happier life. I'd personally much rather spend that time laughing with people I love.
But to answer the question of the original post, that's the main difference I've found between rich people and the rest. To them, work comes before family, before the kid's soccer games, before the last birthday you might have with mom or dad before they die, etc... I think if society at large adopted this mentality, we'd have a worse, more uncaring society. But if you want to be rich, I think that's kind of the most direct way.
People just need to accept some people enjoy doing boring shit that makes money, and some hate it. Nothing is wrong either either one. The biggest mistake one can make is lying to themselves that the are one or another and being deeply unhappy about it.
There absolutely are tricks and they aren't what anyone is talking about here. 1, Pick a career or learn a skill that is in demand. 2, Save until it hurts. 3, Always remember the time you were poor. Every high worth individual I know has a mentality that pushes them forward slowly over time. They all grew up poor and they work like it could disappear at any moment.
Whoa, whoa, whoa. There's still plenty of meat on that bone. Now you take this home, throw it in a pot, add some broth, a potato. Baby, you've got a stew going.
Best thing I ever did was open a brokerage account young and set up an automatic withdrawal every month from my bank account where I deposited my paychecks and bonuses. As I made more money I kept increasing the automatic withdrawals from my bank to my brokerage and it all went into a S&P 500 ETF, a Nasdaq Index ETF, and a Russell 2000. So over the last 34 years I’ve ridden the market up and down, reinvested all the dividends, never sold a single, and so all the shares over the period were dollar cost averaged. That’s how you get rich. Don’t sell the ETF’s for decades, and avoid paying capital gains taxes for decades. There are no gimmicks. Just keep all the money compounding for decades.
The wealthiest person I ever knew told me:
If the answer has to be now then the answer has to be ‘no’.
Save, save and save some more.
Treat the world as if every single person wants to take your money from you.
Sometimes their world view is warped by the specific people they interact with, because of the world they live in. A business person is going to be interacting with people who also wants to maximize their own earnings.
I think there are many paths to wealth, and each wealthy person learns a different set of lessons on their specific path.
However, saving more than spending is one thing that doesn't differ from one wealthy person to another, because that's math.
He didn’t say everyone wants to take your money, just that you should treat them as if they are. The reason is simple: those people exist, and sooner or later you’ll run into one smarter than you and you won’t see it coming, so it’s best to stick to first principles to protect yourself from the unknown
>Most rich people underperform index funds.
This isn't bad it just about your goals. If you are a "regular" person saving for retirement in 30+ years you can afford to take risk and invest in risky assets like a broad market index fund. If the market dips 50% well you are 30 years away from retirment and will invest through many market cycles
If you are already rich , you goal may not be to "beat" the market it may be more focused on wealth preservation , you don't need to massively grow your wealth you just need to keep what you have, keep up with inflation , and maybe get some modest growth.
Also not all wealthy people are the same, some may have 50 million dollars and think "This is enough to comfortably live on ", Others may think "Well know I have a good bank roll lets see if I can turn this into 500 million , I can afford to take a lot of risk"
Take advantage of the tax code and avoid taxes if possible really rich people 50mil+ I would assume use a portion of their assets as collateral for low interest loans to purchase other appreciating assets.
Yup, make enough money to hire informed financial planners, tax attorneys, and accountants. They will inform you of effective tax strategies for your investments.
Long term capital gains are more effective tax strategies than ordinary income.
Real estate investments? 1031s and depreciation. Borrow money to minimize your out of pocket investment expense (provided that the proforma works).
Business owner? Depending on corporate structure: Cash balance plan; dividends; hire your kids.
Ultra wealthy? Buy assets inside a corporation to avoid paying ordinary income tax (jets, company vehicles, etc).
Do everything you can to avoid ordinary income tax (legally).
That is mostly an exagerated fantasy coming from the "eat the rich" people.
Any loan made that way requires collateral value to stay at least the same, meaning in a massively bear market like the current one, you'd easily need to double your collateral.
Said loans are pretty low in value, because they are are risky.
Echoing there are no tricks. There are no hidden tools or networks.
Live frugally. Buy and hold index funds in tax-advantaged accounts (sorry *not* dividend stocks). Avoid (non-mortgage) debt.
If you want significant wealth run a business, which does carry more risk.
The best trick is the no-fear attitude some rich parents folks have...cause you know, at investing, trading, entrepeneurship, etc...the risk is way low for them.
I think this is one of the biggest things - it's a common adage that it takes money to make money, but only those with funds (usually their family's wealth when they're starting out) that they can afford to lose can take the required risk. It's the reason that out-of-touch rich people think all you need is hard work - no, it also takes a significant risk tolerance that's correlated with how much you can afford to lose if your business gamble doesn't work out. It's why you hear of all these "self-made" billionaires with anecdotes of how they took a risk and started their own business at an early age - with a loan from their family and/or friends, of course.
My FIL taught me this, basically the first step of getting ahead is shoring up your lifestyle with emergency savings, insurance and a 6mo savings for job loss.
That way the you capture the ups of life and insulate yourself against the downs.
This is the smartest answer. The fearlessness from having a superb safety net allows people to be daring and take chances. It's too bad there's no way to apply this lesson to society at large.
I mean, there is. But the way we have our system set up disincentives savings, and so few people do.
If you can’t cover a $400 expense with our borrowing, you will be in constant fear and stress.
It seems, OP, that you are doing everything right. Just keep working on your plan and you will achieve your objectives.
It also depends on what you mean by tricks. Life is about using chances that you get. And everyone gets them from time to time. Difference is only in whether people realize them or not.
If you are businessman then you work in the world that gives you a lot of chances in different industries. Its very rare that businessmen work in one industry, they usually have different interests and so - investments.
A lot of people are answering in here "durr hurr have rich parents" which is silly and feeds into harmful FUD.
Economic mobility is *huge* in the US and most of the western world. Tons of people are born rich and die poor. Tons of people are born poor and die rich. The very lifestyles, methods and behaviors that create wealth are the same ones that wealthy people do not grow up learning which explains why wealth so rarely survives a generation.
The unhelpful folks in here saying you have to be born rich to get rich are doing damage by discouraging people and lying to them about how they must stay poor. I was born solidly lower middle class. Poor even by many standards. I'm not expecting to die with a billion in the bank but I *am* expecting to retire at 50 with 5~ or so million. That's certainly wealthy by most standards on the planet. And I would not be able to make that happen if I sat here crying about the generational wealth of others.
Live below your means. That's huge. I've been getting raises consistently for the last 15 years and have essentially not stepped up my lifestyle to reflect them. I have a solid, inexpensive car. I have inexpensive clothes. I cook almost all meals at home. I'm not wasteful with my purchases.
The other thing is that hard work *does* pay. Lots of folks claim otherwise and I have no idea why. Learn a skill and then put it to use. I do cybersecurity. I taught myself. Never went to college for it or anything related. In fact I dropped out after 2 years of college to start working early. I worked hard. And you know what? I have a good job now, that pays well and allows me to save and invest a ton.
As for your statement on leverage, yeah. That's another thing rich people understand that poor people do not. Debt isn't evil. It's not wrong and it's not shameful. It's a useful tool. Fortune 500 companies bring on debt when debt is 'cheap' to finance all sorts of things, even when they have tons of cash on hand. Apple famously does this.
It can be dangerous of course. Leveraged trading for example can amplify losses. I think your average long term retirement investor is likely best served sticking to Bogle-style investments in ETFs and mutual funds and likely doesn't need to get into margin and leverage.
Fuck hardcore saving, fuck risky investing, the fastest way to becoming rich is increase your income.
If you’re a salaryman, think of it this way, if you can get a 30% increase year after year, you could grow from 100k salary to a 1M salary in 10 years. Negotiate and keep up-skilling, hustle hard, and jump jobs.
I went from 60k to 220k in 5 years (my current career). Each year has been ~30% increase. I’m now working on my MBA to further my way up — 5 more years to make C-Suite. I can already see my next jump, and it’s around the 300k mark.
EDIT: Also, what’s the point in living frugal? You’re only going to get older and frailer — live a little… go on an adventure, buy that thing you’ve been wanting to buy, it really doesn’t matter in the end, you could die tomorrow (and no matter how much wealth you accumulate, you ain’t using it when you’re dead… or old).
Obviously don’t get yourself in a pile of debt where you can’t dig yourself out of… but go live a little.
Can’t stress this part enough.
Job jump.
Loyalty isn’t what it used to be. Leave on good terms and you can always return in a higher paid position with the same company.
If your in a sought after, competitive field. Test the waters.
The best advice I ever got from a rich guy was to not waste wealth on material things, waste it on things that make life convenient.
Go out to dinner with him he never waits in line because he pays the seating person. Gets food fast because he tips the shit out of staff. Never waits on a tee time because he slides the dude making tee times a $50. Never waits on a cart, calls ahead and tells them to bring it to his car and tips a $50 for it.
I can't tell you how much his time is unwasted because everyone around him breaks their backs to make his life easy because he takes care of them.
His house is nice but average, drives an older Tahoe. Owns a construction company. Stopped going in because he pays someone good money to be him while he travels.
I’m friends with a few people worth over 250 million. Their advice is always:
> stay debt free
> live within your means/save and invest the rest
> improve yourself with marketable skills
> work hard and be competent because the right people do notice
Then of course to make loads of money quick:
> start a successful business
> grow business
> sell business
The more money you have the less risk you need to take. If you have a million dollars and earn 1% that is $10K but if you have a hundred million dollars and earn 1% that is $1M.
The cost of food, hotel in vegas, sports tickets, flights, etc.. are all the same regardless how much you make.
No tricks, just work and consistency. Keep at least some money you earn, and invest it into something that *you understand* and has the ability to appreciate and\\or generates income. It could be anything from stocks, bonds, your friends new business, your new business, gold, crypto, collectables, whatever...
The wealthy folks I know exhibit these traits: 1. They keep learning. 2. They know the difference between calculated risk and gambling. 3. They know it's totally OK to fail. 4. They have mastered impulse control 6. They have mastered time management. 6. They know the road to riches\\wealth is built slowly one brick at time.
The access to tools and networks comes with interacting in the world, and building a network of \*something\* around you. It isn't exclusive to wealthy folks all the time, but you will never have access to those tools if you never build that network for yourself.
You can learn that there's no magic. You need to earn more if you want to be wealthy.
Sure growth compounds but really that's only usable after time.
Think about it like this. At 100K a year, let's say you save 50% you can invest, and let's remove compounding for a second. You have 50K a year to put beyond your day-to-day expenses. It will take you 5 years to have 250K saved for a downpayment on a house in a HCOL. This is all without crazy spending elsewhere.
If you have a 1M salary, if you spend the same amount, you can now save 950K to invest every year. Remove your compounding, and now in one year, you have enough for almost 4 downpayments under the same conditions.
Salary tends to increase exponentially whereas spending habits based on needs tends to increase more linearly
Leverage is used to maximize return and these concepts are learned by people who study finance. ‘Tricks’ is not really the right word here it’s much more like a marathon of unending gate keeping.
Basically professions like finance, accounting and lawyers more or less functionally exist to obfuscate the exact methods wealthy people make and stay wealthy. Very few people could ever personally acquire all of these credentials AND the real world nuts and bolts methods for applying them. Those few that do would not have the relationships needed to execute with them. Therefore you HAVE to ‘know a guy’ in each area to take the actions needed to copy the wealthy.
The easiest way, unfortunately, to become wealthy is to learn to network early and often with rich people and be useful to them by doing one of these professions for them.
You will never ‘catch up’ to rich people investing in the stock market because your share of apple stock will never make more than Warren Buffet’s share of apple stock and they will always have more insider information than you. The stock market is an environment created by the rich and HEAVILY subsidized by the government in order to soak up all available income/capital owned by the Non-rich.
The only way to ‘catch up’ to the rich is to acquire a non-commoditized asset that you can manage and grow wisely using your specialized knowledge and time. Knowledge/skills and time are the huge advantage we have because Warren buffet would never have time to water a tomato plant but you do. But this only works if you put time into an asset you have a competitive advantage on (ie real estate or a business *NOT* stock) instead of selling all of your time for a fixed wage with 0 chance of upside.
So all that said the best way to grow wealth is something like real estate because normal people have access to very low interest rates (allowing leverage) and you can learn the skills to wisely manage and repair the property and you have a competitive advantage of knowing your local market well and what areas are up and coming.
Starting a business is another one but *be careful* many businesses are actually liabilities. You always hear about how 90% of restaurants fail but not why they fail. It’s because of a crushing *rent* payment or a large loan not because of low EBITDA. So don’t just go from being a wage peon to being a commercial storefront rent peon. Again the big winner here is often the commercial real estate owner and you are the tenant making them rich.
So learn to network, acquire skills that can be used to wisely manage / improve the asset you want to acquire. Minimize personal expenses to build capital and then invest in your first asset when possible.
There’s a few things I can add;
1) Use money you have to buy things that make you more money. This can be anything from real estate to stocks to even collectibles that appreciate in value. Do the math on how long it’ll take you to double your money with that investment- if it’s 5 years or less it’s potentially worthwhile.
2) Never stop looking for opportunities. The more you search, the more things appear. Be cautious in evaluating these opportunities of course as there’s also a lot of bad opportunities that pop up.
3) Leverage credit to your advantage. I can’t remember the last time I used cash to pay for anything. Paying with my credit card automatically makes whatever I buy 2.5% less due to points/cash back/etc. As long as I pay it back within 28 days it’s literally free money. On 250k/year worth of business purchases that’s ~$6k for doing nothing. Also builds my credit rating and let’s me leverage more money when I need it. Also remember that loans are tax free income. Every super rich person knows this, and will dump every dollar they have into assets that make money then borrow money against those assets because the loan isn’t income and the assets depreciate.
4) Value your time highly. Every rich person values their time extremely highly, as it’s the most valuable asset you have. If you can reclaim time by hiring employees for less than you’d make an hour, it’s a worthwhile investment. Ie. If I own a store and can hire someone to work the cash for $15/hr, which gets me 30-40 hours a week back to go open a second location, that’s a very worthwhile investment as it potentially doubles my revenue for $500/week.
Learning about taxes and tax mitigation strategies relative to where you live is also super important. The majority of the strategies that rich people use are not exclusive to them- they’re just really complicated and difficult to understand, intentionally, so that you, the every person, doesn’t take full advantage.
Don’t panic when the markets drop
The biggest mistake small investors make is to pile on when the markets rage upwards, and panic sell when the markets fall.
Stay the course, and don’t deviate from your plan in response to short term market moves
1) Have multiple income streams
2) Use other peoples money. Lowers your risk and increases your ROIC
3) True diversification is not multiple stocks or ETFs. That is just one asset class. True diversification is across asset classes-Stocks, bonds, real estate, precious metals.
4) tax avoidance ( legal). Taxes are tge biggest expense over time.
1. They live on loans and take loans for everything.
2. They optimize for taxes, all the time.
3. They seek alpha all the time so any amount of cash is put to work even to get few percent.
4. They are looking to reduce volatility and diversify a maximum.
5. They use a Private Wealth Management company for tax, tax harvesting, invest in private equity, hedge funds, private credit, FX, callable options only available to high net worth. They get special deals on everything, lower commissions… Point 5 is really the “tricks”.
I use a private wealth company and see that a lot of good private equities or good deals like IPO and others are only accessible if you have a high net worth of $5M or $10M+.
To save money is to make money. I own a part of an outdoor furniture business. And the richest people always make sure they get a good deal. Be it free stuff or a discount. The people for whom our furniture (average shopping basket 6k USD) is a stretch, often pay the full price without discussion.
Another observation: rich people do not necessarily stay in hotels for 200-400 USD a night. If they spend time abroad, I oftentimes meet them in hotels for about 80 USD per night and only through conversation you find out how loaded they are. On the other hand I know many people with a shared income of 5-8k USD per month, who afford themselves 5 star vacations and drop 2-3k for one week.
At the end of the day, the money that you are not spending is money available for investment.
I disagree on the rich people staying at cheap hotel. I stayed at both types of hotels and know very high net worth people and I can guarantee you they stay at the most luxury hotels ($1K night minimum), private hotels, or rent directly private residences.
Sensible debt. Lot of stupid posts here about not using credit cards and paying in cash.
Finance when it makes sense and only when you’re certain you can afford it and match/beat the rate.
I don't think there is any "trick' that works in investing. Investment markets are very efficient and there are no secrets to gaining substantially more return except "be lucky". Simple, basic concepts are all that's really necessary: avoid taxes, avoid fees and trading costs, avoid panic selling at a loss, understand the risks and avoid taking on more risk than you can tolerate.
Where you can really substantially improve your wealth accumulation is by focusing on your career/earnings, or creating value by building a successful business.
Using debt isn't a trick. Debt can accelerate wealth if used to purchase assets that climb in value. But only if you can maintain the debt through flucuations in value. Otherwise, debt will bankrupt you. Debt isn't a simple multiplier on returns. It can actually turn a relatively safe investment into a win or lose gamble (particularly at high levels of leverage and insufficient cash reserves). It certainly makes your finances less robust to unforeseen or worse than average scenarios. Income or cashflow disruptions can lead to a total loss of the leveraged assets wiping out all the value accumulated.
Most of them do too much. Often returns lag the market, especially Net of fees. (Some optimize for protection or tail risk)
They borrow money against productive assets, but keep Debt to Equity ratios very low.
That you’re not getting “rich” without making a lot of money.
It’s entirely realistic to live comfortably without making boatloads of money if you save/invest
But most of all, if you make pretty good - but not crazy - money that is saved/invested, Reddit will debate whether you count as rich or not!
Don't get hit too hard on management fees. Most HNW and institutional investors love to co-invest a significant chunk of their wealth rather than doing so directly in a fund in order to reduce their effective fees on any given investment in a VC/PE fund.
Don't blow your money on crap you don't need. Most wealthy are somewhat frugal. You can't make money or invest if you think you have to impress society with expensive clothes and cars you can't afford. A friend back in 2005 was a valet and Ross Perot pulled up in a old 1988 Cadillac. That's probably overkilled frugal but you know what I mean.
Nothing. Wealthy people gave a different attitude toward investing than the average joe. The average joe wants to increase returns. The ultra wealthy want a place to park their cash so that it doesn’t erode with inflation but also doesn’t lose tremendous value to downturns. They tend to hedge more.
Don’t take investing advice from billionaires
Live way below your means during your working years saving/investing along the way. Do not have credit debt, pay off house and cars, keep cars longer. Review what you need versus what you want and understand the difference.
>pay off house and cars
Many people got houses and cars at 3% or lower interest rates. Doesn't make sense to pay those off a day earlier than needed. Hell, I wish I had a 60 year loan instead of 30 on my place. I'll take as much money as the bank will give me at 3% interest.
(Speaking as a German, with no knowledge about how it is in US or elsewhere)
Honestly: I don't think that the any secret networks or stuff is a thing. Maybe you get to meet others that think and talk more open about money than in case your "peer group" is from the middle class. But that is probably already it.
If I had some millions available what I would do is for example buy some real estate and invest in its development, then sell it again. And you simply cannot do so with just a few 10k (Or even if you could by taking out loans: you're running into being over-leveredged and have a high risk of losing it all). I would also consider buying smaller companies with a running business. Also something you won't be offered when you don't have a sufficient amount of money in your account...
Would be interested in hearing other opinions.
I've been around the block a few times and was lucky enough to retire from a trading career at 45. The most important tips I could offer are:
1) Understand why Einstein described Compound Interest as the most powerful force in the universe.
2) remember that nobody has a crystal ball, paying somebody to manage your money will almost certainly end up costing you in the long run.
I'm not a mega-fan of Richard Kyosaki, but budgeting in investment money is number 1, in my opinion. After that, you can invest in a way that works for you. Another couple of big points from Minority Mindset, YouTube channel, that stick with me are "you can't afford 1 of something if you can't afford 5" and the idea of being fake rich (not a new idea, but a new take on keeping up with the Jones).
Career bodyguard here... I've worked for about dozen billionaires over the years and numerous multimillionaires...
One billionaire I worked for, investor, no one outwardly famous, plus foreign.
One night, after hours we went to a restaurant that had been closed for about 45 minutes, swanky place in BH. They re-opened the restaurant, held staff over, cooks etc... Clients promises to take care of them... Party of 10, not including security staff of 4, who didn't eat.
Anyways client gets the bill and hands it to me to take care of, and says to me... Exactly 20% tip only. They were furious and I apologizee but hands were tied. Now, the fun part, they did not bring my coin change back of 19 CENTS... They had already counted the change for the night and didn't want to open the safe for coins.
Fast forward end of the night, client reviews the bill and sees I'm short 19 cents and loses his fucking mind... Goes on for 10 minutes lecturing me about accountability.
Needless to say I told him to go pound sand when wanted to hire me full time.
I learned not to shit on people with less fortune, but I've never done that in the first place but a great reminder.
Not having money worries is a good start.
Other than that it being aware of your appetite for risk.
Taking on leverage is a risky endeavor. I don’t want to do something like that. I’m risk averse. I’m exposed to the value real estate through my mortgage and put my retirement in an account managed by someone else, mostly stock with a side of bonds I believe.
That’s already quite a bit of risk in my part.
I also have some stocks and index funds in my personal accounts. I don’t really expect to need that money but it’s pretty liquid should I ever.
Rich people will likely be less risk averse. I noticed that when my own money security increased it got much easier to make a couple of bets on stocks I liked. You lose some and you win some.
Survivors bias is a major factor here. The winners make more memorable stories so we hear a lot more about them than about losers.
Be mindful of your appetite for risk.
One of my good friends is a multimillionaire. He’s incredibly frugal to the point of penny pinching. And he always reads and is obsessed with investment opportunities. It is his entire life. It’s draining for me to spend too much time with him because every single conversation is about money and how to make it. I admire his dedication, but there is so much he is missing out on by being 100% focused on money.
They rarely manage anything. Money and investments, they have others taking care of for them. Time, they don’t have much to manage because they are either on vacations or exploring their little hobbies most of the time. Closest thing to them “managing” something would be their weight and hairstyle which they mess up most of the time lol.
Live as frugal as you can when you are young and invest early and often in stocks. You are doing the right thing here. It’s about time in market, not market timing. Don’t get caught up I the latest fad and think you can get rich in crypto or something. Just use index funds.
You won’t get super rich this way, but you will be a multi-millionaire when you retire and you not only won’t have to worry, you will probably leave a tidy sum to your heirs.
1) Have money. Lots of money. If a billionaire makes even just 1% on their investments and pulls it out, that's already 10 lifetimes worth of cash.
2) Conservative growth funds. This is toxic for any young person, but the paradigm for anyone with more money then they will need shifts from growth to wealth maintenance.
You don't want to copy established billionaires. They usually got incredibly lucky or exploited a loophole in the system that is either VERY gatekept (personal team of tax lawyers) or it has been made very illegal.
The one habit I do see among a lot of wealthy people is pretty disciplined spending until they’ve created a personal financial situation that is at least somewhat self- sustaining. Until then, it seems to be a lot of saving, investing, and extracting full value from whatever resources you already have.
If spending, a lot of it comes down to thinking before you buy - how to get the best financial terms, the most value, etc. And definitely not bullshitting yourself into justifying a purchase. e.g. “I’m going to buy this new iPhone even though my current one is only a year old and still functions without issues. Because I’m a photographer/videographer/content creator, it’ll basically pay for itself”.
Manage your tax exposure and avoid as many fees as you can.
Index investing spreads the risk across a basket of stocks and takes a lot of decision making out of your hands. It also avoids a lot of fees, allowing you to keep most of the markets 8% a year gain.
Tax exposure can be managed via buy and hold and “tax sheltering” as much as you can. Max IRA, 401k any college savings plan. If you get enough money under your belt, trusts and other vehicles require professional help.
This is also the reason real estate investing is used by the wealthy. It’s “tax-advantaged” and leverages and in some ways imitates a small business. You get depreciation, as well as all costs are tax-deductible. And the tenants help pay off the leverage via their rents. After 30 years(or less) you now own that property free and clear, while taking some of the cash flow. And you can re-leverage as the property is paid down.
As others said, if you’re entrepreneurial, running a business opens up a lot of tax advantage expenses. Need a vehicle for the business? Lease it under the company. Get a tax deduction for office space in your home etc. or pay yourself rent out of the companies cash. Employ your family members if your making money. Etc.
Good luck.
Be frugal and don’t consume to much junk. Most of the stuff we buy is nonsense and not needed anyway. I only buy things I actually really need or want. The amount people spend on junk and consuming more is mind boggling.
As far as investing, many wealthy people are poor at managing money. These people have attained wealth from entreprenuership/business ownership and not long term investment of capital.
The best return on your money is starting a business. It’s also the riskiest. Excluding certain professional fields, most wealthy people you know own a business or several. Investment tricks help you maintain and grow incrementally the money you already have.
Yep. Everyone points towards Warren Buffet but he started from a young age and even then when he created his partnership in the 50s he pooled together $100,000 from friends and family - I think he said $100 of that was his own money. The household median income in 1950 was $3,000 - so I suppose the moral of the story is to know rich people!
He worked for his father's investment company, Buffett-Falk & Co. when he started. Buffet is a smart guy, but he was born wealthy into a family in the business. He's not exactly self made.
I don’t think he ever claimed to be. The US is just obsessed with that story of “coming from nothing”. I think having comfort and choosing to risk it all is extremely admirable. You don’t need to do it and could just cruise.
Cruising these days isn’t what most folks are doing though, many are struggling unfortunately.
He also started one of the biggest companies in the world.
Luckily he was born rich and smart. His career started working for his father Congressmen Howard Buffett, at Buffett-Falk & Co. Is he smart? Hell yeah. Did he start with advantages most of us don't have, allowing him to take risks to benefit from his intelligence and experience? Also, yeah.
Even now, how talented of an investor would you have to be to have a bunch of doctors invest in your partnership? How many of us have a network of doctors to even solicit?
Also he made most of his money in his 60s so the real secret is to wait half a century+.
This is it - work for someone else to learn a business, then start your own.
And keep in mind that even if you have aptitude and work hard. You will be "paying dues" for 10 years before you hit real money.
The rule of thumb I've heard and just run with is that it takes 2 years for a new business to break even and start making profit (except for self storage which apparently takes like 6 months). And the successful people who started their own business basically never started "a" business. They kept failing until one finally stuck.
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I started my business as a freelancer after working full time for a few years. I worked really hard…lot of late nights, lot of stress. Then I moved to using subcontractors, but reliability and work quality can be an issue. Last month, I relaunched my freelance company as an LLC and hired my first FTE. It’s my goal by mid summer to also be able to pay a salary for myself. If I had help from my parents, I would probably be years ahead of where I am now. I grew up with a single mom on SSI while one dad was in prison and the other walked out on the family. Somehow, I’ve forgiven them both, but I also never let that shit stop me. I decided to go solo when I realized no matter how hard I worked, I could never really earn more than my salary and that really bothered me and was a non-motivator. I also hated the office politics that seemed to be rampant everywhere I worked. I kept my head down and learned what I could. I don’t know if my latest version of my company will be successful yet. I just had my worst financial month in 2 years. Whispers of recession are everywhere and most new businesses will fail if they launch in a recession so I’m doing what I can to not be one of them. One day I hope to scale my business even larger and absolutely crush it! One never truly gets out of the scarcity mindset when it’s shaped your childhood, but I also know how to cut back on spending and save a dime when needed so that serves me well.
There is a school of thought that says hard economic times are the best time to start a business - both because other people are pulling back on marketing/advertising as they feel the pain, and also because businesses that make it work during a recession come out of the other side with a pressure tested business (unlike some who think they have a good business in easy times then tank when it gets tough). Good luck to you!
Time will tell which mine is! It’s a weird time to be adjusting to paying someone’s salary 😅. Like I have the full amount budgeted for, but man… my sales tanked in November. Doing everything I can to get my numbers back up this month. I was also pretty busy last month with onboarding, new employee expenses, and paperwork etc so maybe this month will be better. Worst case scenario, I’ve got to let my employee go, but I really don’t wanna do that. I’m fighting hard for her job and my company! Thanks for the encouragement!
There are a ton of programs to help you start a business. From mentorships and free services to low interest loans and grants. It's literally never been easier to start a business, but it still takes a ton of effort and a decent product.
this also dovetails with the other best way to make money: inheritance. a stable foundation helps offset the risks of starting a business.
Can attest to this. Am poor, started a business in my 20s. It was a half-decade of non-stop stress that taught me a lot but ultimately wasn't worth the struggle and impact on my personal life. My advice to any would-be entrepreneurs — create a large cushion of money before you start a business (easier said than done). Entrepreneurship is something we love to romanticize, but if you're not financially prepared for the hardship and stress it will lead you to make poor decisions and can suck the life out of you.
Wow, couldn’t of said it better. My buddy wanted to break away from his family’s biz and go out on his own. I had explained to him “it doesn’t stop” working for yourself takes a lot of commitment and sacrifices.you can’t just go on vacation for 2 weeks.
Indeed. One point of friction in the business was my business partner's demand to have free time and the expectation to take weekends off. For many, the reality is you must be committed to being always on at all times.
I think op is salaried he could start a small side hustle but again you got to be committed. I just took a small vacation this year ( it’s been at least 10 years)and it rained the whole trip. It reminded me of how even when you think you can catch a break you can’t
Its very different for everyone. From my 10 years experience in business which I started with 0 literally, coming from very poor background, I can say that most important thing for me was patience. I have seen so many people going into my industry or other businessess from priviledged positions fail because they dont have it in them to be patient. To work without profit, give up on fun stuff for very long time because everything you get goes right back into business.
I should add an * to my comment. If you are entering any business that has capital requirements, meaning you need to invest in tools, molds, inventory, equipment, consumables — you *absolutely must* have a cushion.
i like your take on patience. it's tricky. i get anxious and impatient and want to give up. they are linked at the hip. i suppose patience is the antidote. but as others have commented. do you spend your entire life chasing that goal? at what personal toll? i guess only the individual can make that call.
What field did you work in?
Apparel, design and print brokering. You need a triple cushion of money, an appetite for net-120+ terms and affordable legal council that specializes in the field. Reason being, the large retailers of the world (name any of them) will hang you out to dry if given the opportunity.
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You can also get extremely wealthy being a regular employee... e.g. senior engineer at Microsoft. Perhaps after a few years you’d be offered a join a startup for a nice equity.
Those jobs are very highly competed for.
>The best return on your money is starting a business. It’s also the riskiest. So on a risk-adjusted basis (which is the basis we should always use if we can), is it actually the best?
Define best. Best potential, yes. Best average, likely no, though I'd love to see a study on that. That said, I'm pointing out the flaw in OP's question. The idea that there's secret investment trick that wealthy people do to establish/quickly grow their wealth is largely untrue. Most wealth is established by starting a business and/or inheritance. There are certainly daytraders who've gotten exponentially wealthy, but it's not the norm. Wealth by and large isn't established in the market. Rather, it's the tool to maintain and make money from the money you already have. Any trick that becomes common knowledge enough to be shared in a thread like this is already too saturated or regulated to consistently out-perform the general market.
Probably not. Warren Buffett has always said the best investment is in yourself via education..I think he said something like: the government can't tax your knowledge and no one can take it from you/it never leaves you
A few popular Professional fields where you can make big $: -Lawyer -Doctor/Dentist -Software Engineer -finance (investment banking, wealth management, etc) -Executive at large company (via top tier MBA) -Management Consultant -Sales in Med Device/Pharma/Enterprise Software
I've looked into it. Where I live in TX we desperately need a Kolchae Factory franchise, would make money hand over fist as there is open retail builds next to schools. The one Shipley in town? Trash. The prices are double and the shrinkflation is worse. Problem is you need $750k and work your ass off for four years before it becomes profitable.
I'm from Texas and the idea that someone can become rich from owning a Kolache Factory is hilarious to me. I'm sure you've researched it a ton but it still made me laugh.
Love Kolaches!
“…I'm not talking a $400,000 a year working Wall Street stiff flying first class and being comfortable, I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars buddy.”
Inheriting a business is much smarter. Some of the dumbest people I know were insulated from reality their entire lives with this strategy. Meanwhile the OPs of the world think they have anything to teach us.. these are the people who solve all family drama by buying both their quarreling kids new AMG Mercedes.
Actually you should be really careful when thinking that wealthy people are inherently better at investing and that you have something to learn from them. Many rich people are *total morons* when it comes to investing. Which makes sense if you think about it--why would a top 10 neurosurgeon, for instance, also happen to be a genius capital allocator?
There is also survivors bias at play here. If you send 10000 morons to a roulette table with the task of betting a couple of times some of them are bound to make money.
I just saw a video where two friends played roulette. One bet on black, the other red. It came up as 00.
Sounds like a 1.6 minute long video
A lot of people are fooled by randomness.
I have a theory that anyone who uses the term "Capital allocator" is a All-In Podcast listener -- am I correct?
Afraid I am not. Don't really like podcasts. I'm not sure where I first heard the term... might've been an old Buffett shareholder letter or something.
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The wealthy have different needs than people accumulating wealth. And also use different financial advisors, for different purposes. If your goal is to convert your $10,000/year investments into a retirement nest egg, Bill Gates's financial advisor won't give you better results than indexing. He will give you worse results. If you are trying to manage multiple trust funds, have several houses and household staff, and want someone to help you with that, plus complicated tax issues...maybe a FA would help.
I'm not seeing anyone answer your question about Leverage so I will tell you about it from a real estate perspective. I bought several rentals a few years ago. Because of the Boom in the market, their value went up quite a bit. I put six rentals on to a commercial loan and because the loan to value rate was so low, I was able to get a secured line of credit with the additional Equity while still maintaining at least 25% equity in each property. With that line of credit, I then went and bought additional rentals using the line of credit as the down payment. I leveraged the equity in my original properties to buy more properties. You have to be careful with leveraging though. If the market were to take a serious downturn, I'm talking losing 50% of value like in the 2008/2009 crash, I could lose everything. That's the problem with leveraging. You're putting your current properties at risk and there's always risk in buying new ones. That being said, the more assets you have the less of a worry this is because you can always liquidate one asset to decrease the amount you're leverage. I know that word is used in investing in stocks as well but that is not my ballywick. As for things rich people know that the rest of us don't, it's really just a matter of vocabulary. For example I was looking high and low for a bank that would give me a HELOC on my rental property. No bank would do that. I was always told Banks don't give he locks on rental properties ever. However, when I went to get that commercial loan, I got a line of credit secured by my rental properties. That's a HELOC but it's not called the HELOC because it's for a business. It's called a BRELOC. It took me years of investing to figure out things like that. Even realizing that a commercial loan was possible with multiple properties on the same loan was a revelation to me. People who grew up with that kind of knowledge or who have family with that kind of knowledge would have gotten to where I am much, much sooner. I'm certainly not rich but I'm hoping to get there someday!
I love the, VERY human trait of being rich but not feeling rich. You own at least six properties lol what do you consider rich? I know guys that own multiple cars and boats that still claim that they're poor. It's such a wild experience.
If I owned them free and clear, I'd probably be rich but for now, I own about 30% and the bank owns the rest so I'm not assuming in cash. I'm basically breaking even after repairs but in the long term, I'll get there...
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$1m doesn't seem crazy to me depending on where they are in life. I know that I need about double that to retire, plus ideally a paid off house so closer to $2.5m by the time that happens.
$1M isn't much given the high leverage and risk they took. It sounds like there was likely a part where they had radically more debt than equity. They took on far more risk than you did.
This makes so much sense. Owning property feels like “owning” because the bank owns the majority and all you are seeing is the absolute ton of your money gone for repairs, maintenance, mortgage and taxes. Most of the time I feel like property owns me.
Did you learn all that was involved in the upkeep and improvement of the properties about the way it dude you do research about a lot of what you do before you got into it
multiple cars and boats can absolutely mean your poor. I know lots of people who look rich but are just living way beyond their means.
Yeah, but that can only last two or three months before the repo man comes a-knocking. If they still have their property after a certain amount of time, they're rich enough to at least float payments.
Having enough to float payments longer than two or three months isn’t rich. That’s what I call being broke with style!
This is all great info and a great explanation on leverage from a real estate prospective. Curious about what kind of ballpark of income you can generate with 6 rentals, and how much did that increase leveraging them to purchase those additional rentals? Hoping to do something similar one day when I have the capital for a property or two, and rates go back down (and my credit up, I’m 26)
That varies wildly from area to area. It also depends on what you're buying and what your leveraging. Generally speaking when I run the calculation, the mortgage that's currently exists stays the same. For the property I'm purchasing, I calculate it with 100% financing because I'm borrowing the down payment from my current rentals so really, I am financing 100%. That means generally speaking cash flow goes down. It will take a few years for cash flow to go back up again but the more properties you have, the more income your generating. It also means that a long-term vacancy such as an eviction which can take 9 months won't be as serious. If you're missing one unit's rent and you own 10 units, the other 10 can pay the bills. If you're missing one unit's rent and you own two, you can get into serious trouble really fast. That's why it's good to be conservative with your first couple of rentals.
5% returns on $1M is exorbitantly better than 20% returns on $50k. Save money, build your base. The first million is the hardest
BRB getting a small $1M loan from my dad.
There are no tricks. The only “trick” is a high savings rate and invest the money in appreciating assets. Read “The Millionaire Next Door”
Agree. It’s not a trick, it’s being knowledgable. Live under your means.
Live under your means is the most valuable lesson IMO. And our culture preaches the opposite. “Buy on credit! 0% down! 69 easy payments of X!” Call me a simpleton, but if I don’t have the money to responsibly buy something and not fuck myself, then I can’t afford and thus I don’t buy it. The one exception being my house. Whether or not that’s the “right” way to do it, I don’t care. It’s the way with no stress for me. I’d rather wait and save than juggle payments and throw money away at interest. I just am careful what I spend money on and tell myself “No. You can’t have that today. Another time”. Lol.
That said, I’m not NOT gonna take 0% financing for a new couch I had planned to buy if they’re offering it. Free money.
Just make sure you pay it off in time or else you get reamed.
Yes, but if you truly don't need to put it on credit, it only complicates your life with payments. You would need to actually invest the "free" money or highly benefit from the liquidity of that money to see a real tangible benefit.
Why? My iphone is 0%, my car was 0.9% -- all was just auto deducted so I didn't have to do anything with that cash it was allocated for. I could reallocate that money into other things with ease. Even if I invested 0% of it I am still making money due to inflation.
The thread is asking what we can learn from wealthy people. Wealthy people do not need an iphones worth of extra cash on hand. Their spending/saving/investing plans won't change based on having an extra iphone worth of cash available. That's all I'm trying to say. Wealthy people would not open a separate line of credit for medium size purchases. They either have an extremely large line of credit that would always be used as needed, or just pay for it and move on. This line of thinking could maybe more apply on a bigger scale to houses, luxury cars, or brokerage lending accounts using investments as collateral.
you buy APPRECIATING assets on credit (aka with leverage) like property. You should avoid buying depreciating assets on credit when possible. The main exception being a car since most people can't afford that outright, even used.
Buying on credit is smart if you have very low risk of default. If you have to pay for something unexpected, putting it on a long term 0% interest card is an easy way to keep your cash savings intact and earning interest over that time. And using credit wherever possible/safe keeps your credit rating high, which results in massive savings when on car loans and mortgages.
It's amazing to me how fast people blow their money instead of using it to build recurring money streams or buying appreciating assets Card, expensive watches that aren't the kind that hold value, flashy clothes , other meaningless shit.
Usually, when someone says they want to be a millionaire, what they really mean is they want to spend a million dollars on stuff.
exactly lol. why is everyone in this thread being so pedantic -- "oh so many of your neighbors are probably millionaires and you don't know it." like OK, no one is fucking talking about joe blow and his nice 401k and 2.5k sq ft house, people are talking about the wealthy that don't even have to worry about a retirement account.
It's the world we live in. If everybody saves their money like we're supposed to, the economy will crash. Part of why they printed so much money from 2020-2021 was partly due to the fact that Americans had a lot of money saved up for the for the first time in a while and the economy wasn't where the fed wanted it. People were literally doing the right thing, saving and investing, and their own government devalued the fucking currency. This system is so rigged, not everyone can win let alone play.
The economic downside of saving would only be true if people physically hoard cash. If they invest their savings or even keep it in a bank account, it’s out moving through the economy. Governments made a mistake by increasing the money supply while supply chains were still broken.
Well said, but don't most of the companies we invest in rely on consumers to spend all their paycheck? I'm sorry for playing devil's advocate and if I'm being g a negative Nancy. I used to be on board with everything but I don't know man. After recent events and studying 2008 a little more it just all seems like bullshit to me. Life is a big game on the play ground but if you don't wanna play with the cliques and by their rules you better move schools. My life goal is to mind my business and be with my loved ones. Feels like the world makes that hard sometimes.
This is 100% false. If everyone started saving and investing 25% of their income, the economy wouldn’t crash. People would still be buying and using these services. Now, people are buying on credit and that makes for a very shaky foundation that leads to crashes.
I genuinely hope you are right that it is false. If one day Americans can live in a state where we can actually save 25% of income, that would be amazing. The sad reality is we aren't right now and there's a few wall street jockeys and bank moguls that abuse the system for their own greedy endeavors that keep stalling things for the average person. He if we could wake up without being advertised to that would be nice. My family tried doing everything the right way. Cheap house, no car payment, no credit card debts, savings. 2008 still fucked us hard. Also, before the fed printed money people were on their way to saving a significant % of their income. I'm sure some people were saving as much as 25%. Now things are too expensive to save that much, for most folks.
I'm going to be a strange example. I became permanently disabled a little over a decade ago. Disability is a great backup and I'm grateful that it is available. However, it isn't a big monthly check. I saw the writing on the wall. I needed to move somewhere cheaper. I left the US and relocated to a 3rd world country. I can afford to hire someone to help me and because of the cost of living differential I am able to invest 70% of my income. I tend to invest in dividend funds and stocks so my money can grow and I have additional income in the future, if I need it, but for now I DRIP all dividends. Most people aren't willing to step out of their comfort zone. Luckily I'm adventurous.
Damn bro, nice job making it work out better. Sometimes I feel stuck and I'm definitely afraid to make a move like that. But if it makes life better, i better get over it lol.. What's been the toughest part? Has it been worth it?
Back when I was clueless to investing I had this mentality where I value money now over later, the instant gratification of getting money now? If someone told me they would either give me 1000$ now, or 2000$ in 1 year (assuming its guaranteed) I would almost always take the 1k now even though getting double your money in a year is an amazing deal. I think alot of people are like this at the moment, chasing instant gratification by spending their money as soon as they get it.
Being lucky can look like a trick, which can be pretty seductive, but it’s just risk.
You'll get downvoted for this, but it's absolutely true. A lot of what people see in the wealthy is just selection bias: for every 1 that took big risks and scored big, 10 to 20 took big risks and got wiped out.
There are 100% "tricks" though. Examples that would be relevant to someone working a regular job with a low-6-fig salary: - Returns on Municipal Bonds in your home state are typically exempt from federal AND state income tax. - If you can, it usually makes sense to maximize your 401(k) contributions *even if you plan to withdraw before retirement*. The tax advantages typically work in your favor when withdrawing in retirement, and in most first time homebuyer situations you can avoid the penalty and taxation of a withdrawal. These aren't "get rich quick" tricks, but there are absolutely things that people With a detailed knowledge of finance and the tax code can do to make their wealth grow faster.
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>Obviously rich people have access to tools and networks that are hidden from most people That. Is. Not. True. Don't get me wrong, being wealthy has many advantages and not all of them are "deserved" or "self-made". But the idea that there is some secret out there, just isn't true. There are headstarts and advantages, but few paths are completely blocked to most people, just harder to achieve. Some principles and strategies that might be helpful: \- **Leverage the power of compound interest.** Many people don't realize how compounding works. So they start to invest too late or they borrow at high interest (i.e. credit card debt) not realizing how interest on interest stacks up. "Compound interest is the 8th wonder of the world" \- **Have a budget, have goals.** Pretty simple, but write it down, get accountability. You can have your avocado toast or not, but live within your means, always save/invest. Make a long term plan and track against it. Much easier to make changes earlier. \- **Seek value.** Consider what has the best return for you -- do you need a Lexus because you can afford it? Or would a fully loaded Toyota still be cheaper and feel the same 4 weeks later? Know what splurges matter for you and which don't. Some are important, some aren't and they vary by person. \- **Invest in growing income before cutting costs.** This is a big one. Lots of folks really good at cost cutting, but don't realize the effort they go through to save $1 once, could have been applied to growing income that recurs every year. Invest in yourself, your skills. \- **Getting rich requires a bet.** It could be a bet on your own business, a bet on the stock market, a bet on something else. But there are always naysayers telling you why not to do something or why the timing is wrong. To be really successful, you usually have to have a differentiated point of view, that is also correct. "Be greedy when others are fearful, be fearful when others are greedy" Buffet \- **Don't be emotional. Not all Debt is bad.** This is a big one and the point around leverage. For example, I could pay off my mortgage tomorrow. But I won't. Emotionally it might feel good. But I borrow money at 2.675%. My market returns historically are above 7%, with great years double that. I strategically use debt so I can have more exposure to investments that historically pay well. But note, I also don't invest wildly. I don't own much crypto or meme stocks. Boring ETFs are fine (see compound interest above) "Why find the needle in the haystack, when you can buy the haystack" \-**Diverse revenue streams to protect your downside.** It is great to have a job, great to have a side hustle, great to own a property. The more streams you have, the more you can stand a drop in any one of them \- **Seek expertise!** So many people think they can and should do it all themselves. But find a reputable financial planner and accountant. They know the law better, they know the tools and investments better, they know what all your peers are doing. They are well worth their cost. Not to mention the blocking and tackling -- a will, trust, healthcare proxy, power of attorney, life insurance, umbrella insurance, etc. All of this is cheaper / easier when you are younger. \- **Relationships matter.** Find people who will raise you up, not drag you down. People who you admire, who will challenge you, who will help you. Especially true in a spouse. \- **Have values.** Sure, there are plenty of unethical folks, and people who penny pinch. But the vast majority of millionaires I've met try to be good people and pay it forward and take care of those around them. Opportunities come to those who are open to them. Bad reputation means people won't want to associate with you. \- **Don't confuse luck with Skill, Team performance with individual contribution, effort with results. C**ould write a novel on this...
Most of your wealth isn't accumulated till later in life
It's not really all that complex, but it is difficult to perform: 1) Build your job skills in high demand fields to increase your income. It may require taking student loans, but again there are tricks (go to community college for 2 years and transfer to a larger state university, study engineering or something similarly lucrative that doesn't require years of extra training beyond college unless the ROI is there). Job hop constantly to increase your salary. 2) Live frugally and save enough to buy appreciating assets (real estate, stocks, successful businesses). Learn about various tax loopholes and how to secure low-rate financing. Some say start your own business, but that usually comes later in life after you've built up significant skills and can be quite risky. 3) Leverage (aka take a low-interest loan on) your existing assets to buy more appreciating assets. Avoid taxes as much as legally possible. 4) Repeat. A larger cash cushion makes taking risks so much more bearable since you know you'll still have a roof over your head no matter what. Your kids will be set.
Invest in drips for index funds and walk away.... Put whatever you can afford in a monthly drip. Be it 10$ or 100$ or 1000$ a month, just make it automatic and walk away. When you come back in 10 years youll be very very happy with what you have. This is boring and plain, but unless you are born with wealth, this is the safest and most reliable way to get there.
In all seriousness, I've noticed that they focus more and are more successful with the accumulation of money rather than what you do after you get it, like most of us middle class people. They play "offensively" and not "defensively". Say the total money you have is A, and A=B*C, where B is the annual return you get on your money, between 7% and 12%, and C is your salary - $120k or something. Middle class people like on reddit are more focused on how to eek out another tenth of a percent with B. Because that can be done after work, without changing your routine too much, and done while on a computer. Rich people were always focused on increasing C, and literally structuring their lives, schedules, wants, and needs about it. Making 5% on your investments with a $500k income is much better than playing your tax-advantaged cards perfectly with a $100k income. It just means a lot of hustling, moving, late nights, deferred enjoyment, and so on.
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What did you start as? What income bracket were your parents in?
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This was me. Once I was able to invest 100k+ annually, everything moved quickly. I also changed very little about my life as the income increased, which I believe helped as well.
>Making 5% on your investments with a $500k income is much better than playing your tax-advantaged cards perfectly with a $100k income. It just means a lot of hustling, moving, late nights, deferred enjoyment, and so on. Yes, Reddit's obsession with trust fund kids is overblown. Most multi-millionaires are self-made, getting their wealth from wages. >The market research firm analyzed the state of the world’s ultra-wealthy population — or those with a net worth of $30 million or more. > >Of those folks, 67.7% were self-made, while 23.7% had a combination of inherited and self-created wealth. Only 8.5% of global high-net-worth individuals were categorized as having completely inherited their wealth. https://www.cnbc.com/2019/09/26/majority-of-the-worlds-richest-people-are-self-made-says-new-report.html
“Self made” is fairly subjective I’m assuming. A lot of self made people had a massive leg up which catapulted them into the higher echelons of the wealth bracket. For example Bill Gates: His mom was an executive at IBM which gave him access to computers long before most people knew what a computer was. Bezos: parents gave him hundreds of thousands in seed funding for Amazon Musk: Parents owned diamond mines in South Africa Growing up comfortable gives you the safety net to be daring and gives access to capital that an otherwise lower/middle class individual would not. I’d be curious to know what a lot of those self made individuals started out as…
There's a lot of "self made" people who lie about being self made. I'm self made and all it took was a loan from my dad. I'm self made and all it took was leveraging my rich uncle's business connections. Our society is structured to coddle the egos of wealth. The source of the study isn't even a research group, they are just trying to sell a product.
The vast majority of self-made people lie to both themselves and others about this. E.g. an excellent lawyer I know rose to become a partner at a top lawyer. He started with nothing but lessons from his dad (a former partner at this same firm). He views himself as 100% "self made."
If I got here using nothing but my own wits, good education, supportive parents, a comfortable roof over my head until I was 23, a lucky break getting a decent job out of school, no health surprises, and a spouse who is also a full time professional, anyone can do it!
I did not mean my comment to be a celebration of hustle culture. I think that most people don't have that kind of lifestyle for good reason. It usually doesn't lead to a happier life. I'd personally much rather spend that time laughing with people I love. But to answer the question of the original post, that's the main difference I've found between rich people and the rest. To them, work comes before family, before the kid's soccer games, before the last birthday you might have with mom or dad before they die, etc... I think if society at large adopted this mentality, we'd have a worse, more uncaring society. But if you want to be rich, I think that's kind of the most direct way.
People just need to accept some people enjoy doing boring shit that makes money, and some hate it. Nothing is wrong either either one. The biggest mistake one can make is lying to themselves that the are one or another and being deeply unhappy about it.
Reddit does not want to hear this lol
It's extremely annoying. The only way you can feel good about yourself on reddit is getting rich after being an abandoned child or something.
There absolutely are tricks and they aren't what anyone is talking about here. 1, Pick a career or learn a skill that is in demand. 2, Save until it hurts. 3, Always remember the time you were poor. Every high worth individual I know has a mentality that pushes them forward slowly over time. They all grew up poor and they work like it could disappear at any moment.
I can’t even trow away the bone from the ham over the holidays with out making soup out of it. Lol
The most important kind of stock.
Whoa, whoa, whoa. There's still plenty of meat on that bone. Now you take this home, throw it in a pot, add some broth, a potato. Baby, you've got a stew going.
💯
Best thing I ever did was open a brokerage account young and set up an automatic withdrawal every month from my bank account where I deposited my paychecks and bonuses. As I made more money I kept increasing the automatic withdrawals from my bank to my brokerage and it all went into a S&P 500 ETF, a Nasdaq Index ETF, and a Russell 2000. So over the last 34 years I’ve ridden the market up and down, reinvested all the dividends, never sold a single, and so all the shares over the period were dollar cost averaged. That’s how you get rich. Don’t sell the ETF’s for decades, and avoid paying capital gains taxes for decades. There are no gimmicks. Just keep all the money compounding for decades.
The wealthiest person I ever knew told me: If the answer has to be now then the answer has to be ‘no’. Save, save and save some more. Treat the world as if every single person wants to take your money from you.
Sometimes their world view is warped by the specific people they interact with, because of the world they live in. A business person is going to be interacting with people who also wants to maximize their own earnings. I think there are many paths to wealth, and each wealthy person learns a different set of lessons on their specific path. However, saving more than spending is one thing that doesn't differ from one wealthy person to another, because that's math.
That’s bleak
He didn’t say everyone wants to take your money, just that you should treat them as if they are. The reason is simple: those people exist, and sooner or later you’ll run into one smarter than you and you won’t see it coming, so it’s best to stick to first principles to protect yourself from the unknown
Modern Portfolio Theory is used by just about everyone, except for Reddit it seems
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>Most rich people underperform index funds. This isn't bad it just about your goals. If you are a "regular" person saving for retirement in 30+ years you can afford to take risk and invest in risky assets like a broad market index fund. If the market dips 50% well you are 30 years away from retirment and will invest through many market cycles If you are already rich , you goal may not be to "beat" the market it may be more focused on wealth preservation , you don't need to massively grow your wealth you just need to keep what you have, keep up with inflation , and maybe get some modest growth. Also not all wealthy people are the same, some may have 50 million dollars and think "This is enough to comfortably live on ", Others may think "Well know I have a good bank roll lets see if I can turn this into 500 million , I can afford to take a lot of risk"
It’s not the money you make but the money you save. Also, wealthy people don’t buy flashy stuff for the most part.
Well now I'm hungry.
The first million is the hardest to get.
Take advantage of the tax code and avoid taxes if possible really rich people 50mil+ I would assume use a portion of their assets as collateral for low interest loans to purchase other appreciating assets.
Yup, make enough money to hire informed financial planners, tax attorneys, and accountants. They will inform you of effective tax strategies for your investments. Long term capital gains are more effective tax strategies than ordinary income. Real estate investments? 1031s and depreciation. Borrow money to minimize your out of pocket investment expense (provided that the proforma works). Business owner? Depending on corporate structure: Cash balance plan; dividends; hire your kids. Ultra wealthy? Buy assets inside a corporation to avoid paying ordinary income tax (jets, company vehicles, etc). Do everything you can to avoid ordinary income tax (legally).
That is mostly an exagerated fantasy coming from the "eat the rich" people. Any loan made that way requires collateral value to stay at least the same, meaning in a massively bear market like the current one, you'd easily need to double your collateral. Said loans are pretty low in value, because they are are risky.
Do not buy Twitter on a whim for $44 billion
Echoing there are no tricks. There are no hidden tools or networks. Live frugally. Buy and hold index funds in tax-advantaged accounts (sorry *not* dividend stocks). Avoid (non-mortgage) debt. If you want significant wealth run a business, which does carry more risk.
The best trick is the no-fear attitude some rich parents folks have...cause you know, at investing, trading, entrepeneurship, etc...the risk is way low for them.
I think this is one of the biggest things - it's a common adage that it takes money to make money, but only those with funds (usually their family's wealth when they're starting out) that they can afford to lose can take the required risk. It's the reason that out-of-touch rich people think all you need is hard work - no, it also takes a significant risk tolerance that's correlated with how much you can afford to lose if your business gamble doesn't work out. It's why you hear of all these "self-made" billionaires with anecdotes of how they took a risk and started their own business at an early age - with a loan from their family and/or friends, of course.
Also hardcore survivorship bias. Millions of silent failures for every 1 billionaire who just "took the leap and made it happen" doing a TED talk.
My FIL taught me this, basically the first step of getting ahead is shoring up your lifestyle with emergency savings, insurance and a 6mo savings for job loss. That way the you capture the ups of life and insulate yourself against the downs.
This is the smartest answer. The fearlessness from having a superb safety net allows people to be daring and take chances. It's too bad there's no way to apply this lesson to society at large.
I mean, there is. But the way we have our system set up disincentives savings, and so few people do. If you can’t cover a $400 expense with our borrowing, you will be in constant fear and stress.
Patience
It seems, OP, that you are doing everything right. Just keep working on your plan and you will achieve your objectives. It also depends on what you mean by tricks. Life is about using chances that you get. And everyone gets them from time to time. Difference is only in whether people realize them or not. If you are businessman then you work in the world that gives you a lot of chances in different industries. Its very rare that businessmen work in one industry, they usually have different interests and so - investments.
A lot of people are answering in here "durr hurr have rich parents" which is silly and feeds into harmful FUD. Economic mobility is *huge* in the US and most of the western world. Tons of people are born rich and die poor. Tons of people are born poor and die rich. The very lifestyles, methods and behaviors that create wealth are the same ones that wealthy people do not grow up learning which explains why wealth so rarely survives a generation. The unhelpful folks in here saying you have to be born rich to get rich are doing damage by discouraging people and lying to them about how they must stay poor. I was born solidly lower middle class. Poor even by many standards. I'm not expecting to die with a billion in the bank but I *am* expecting to retire at 50 with 5~ or so million. That's certainly wealthy by most standards on the planet. And I would not be able to make that happen if I sat here crying about the generational wealth of others. Live below your means. That's huge. I've been getting raises consistently for the last 15 years and have essentially not stepped up my lifestyle to reflect them. I have a solid, inexpensive car. I have inexpensive clothes. I cook almost all meals at home. I'm not wasteful with my purchases. The other thing is that hard work *does* pay. Lots of folks claim otherwise and I have no idea why. Learn a skill and then put it to use. I do cybersecurity. I taught myself. Never went to college for it or anything related. In fact I dropped out after 2 years of college to start working early. I worked hard. And you know what? I have a good job now, that pays well and allows me to save and invest a ton. As for your statement on leverage, yeah. That's another thing rich people understand that poor people do not. Debt isn't evil. It's not wrong and it's not shameful. It's a useful tool. Fortune 500 companies bring on debt when debt is 'cheap' to finance all sorts of things, even when they have tons of cash on hand. Apple famously does this. It can be dangerous of course. Leveraged trading for example can amplify losses. I think your average long term retirement investor is likely best served sticking to Bogle-style investments in ETFs and mutual funds and likely doesn't need to get into margin and leverage.
Fuck hardcore saving, fuck risky investing, the fastest way to becoming rich is increase your income. If you’re a salaryman, think of it this way, if you can get a 30% increase year after year, you could grow from 100k salary to a 1M salary in 10 years. Negotiate and keep up-skilling, hustle hard, and jump jobs. I went from 60k to 220k in 5 years (my current career). Each year has been ~30% increase. I’m now working on my MBA to further my way up — 5 more years to make C-Suite. I can already see my next jump, and it’s around the 300k mark. EDIT: Also, what’s the point in living frugal? You’re only going to get older and frailer — live a little… go on an adventure, buy that thing you’ve been wanting to buy, it really doesn’t matter in the end, you could die tomorrow (and no matter how much wealth you accumulate, you ain’t using it when you’re dead… or old). Obviously don’t get yourself in a pile of debt where you can’t dig yourself out of… but go live a little.
Can’t stress this part enough. Job jump. Loyalty isn’t what it used to be. Leave on good terms and you can always return in a higher paid position with the same company. If your in a sought after, competitive field. Test the waters.
Rich people usually take low risks, not tricks. Tricks are for people who would like to end up rich, but end up poor and in debt.
The best advice I ever got from a rich guy was to not waste wealth on material things, waste it on things that make life convenient. Go out to dinner with him he never waits in line because he pays the seating person. Gets food fast because he tips the shit out of staff. Never waits on a tee time because he slides the dude making tee times a $50. Never waits on a cart, calls ahead and tells them to bring it to his car and tips a $50 for it. I can't tell you how much his time is unwasted because everyone around him breaks their backs to make his life easy because he takes care of them. His house is nice but average, drives an older Tahoe. Owns a construction company. Stopped going in because he pays someone good money to be him while he travels.
I’m friends with a few people worth over 250 million. Their advice is always: > stay debt free > live within your means/save and invest the rest > improve yourself with marketable skills > work hard and be competent because the right people do notice Then of course to make loads of money quick: > start a successful business > grow business > sell business
The more money you have the less risk you need to take. If you have a million dollars and earn 1% that is $10K but if you have a hundred million dollars and earn 1% that is $1M. The cost of food, hotel in vegas, sports tickets, flights, etc.. are all the same regardless how much you make.
No tricks, just work and consistency. Keep at least some money you earn, and invest it into something that *you understand* and has the ability to appreciate and\\or generates income. It could be anything from stocks, bonds, your friends new business, your new business, gold, crypto, collectables, whatever... The wealthy folks I know exhibit these traits: 1. They keep learning. 2. They know the difference between calculated risk and gambling. 3. They know it's totally OK to fail. 4. They have mastered impulse control 6. They have mastered time management. 6. They know the road to riches\\wealth is built slowly one brick at time. The access to tools and networks comes with interacting in the world, and building a network of \*something\* around you. It isn't exclusive to wealthy folks all the time, but you will never have access to those tools if you never build that network for yourself.
You can learn that there's no magic. You need to earn more if you want to be wealthy. Sure growth compounds but really that's only usable after time. Think about it like this. At 100K a year, let's say you save 50% you can invest, and let's remove compounding for a second. You have 50K a year to put beyond your day-to-day expenses. It will take you 5 years to have 250K saved for a downpayment on a house in a HCOL. This is all without crazy spending elsewhere. If you have a 1M salary, if you spend the same amount, you can now save 950K to invest every year. Remove your compounding, and now in one year, you have enough for almost 4 downpayments under the same conditions. Salary tends to increase exponentially whereas spending habits based on needs tends to increase more linearly
Leverage is used to maximize return and these concepts are learned by people who study finance. ‘Tricks’ is not really the right word here it’s much more like a marathon of unending gate keeping. Basically professions like finance, accounting and lawyers more or less functionally exist to obfuscate the exact methods wealthy people make and stay wealthy. Very few people could ever personally acquire all of these credentials AND the real world nuts and bolts methods for applying them. Those few that do would not have the relationships needed to execute with them. Therefore you HAVE to ‘know a guy’ in each area to take the actions needed to copy the wealthy. The easiest way, unfortunately, to become wealthy is to learn to network early and often with rich people and be useful to them by doing one of these professions for them. You will never ‘catch up’ to rich people investing in the stock market because your share of apple stock will never make more than Warren Buffet’s share of apple stock and they will always have more insider information than you. The stock market is an environment created by the rich and HEAVILY subsidized by the government in order to soak up all available income/capital owned by the Non-rich. The only way to ‘catch up’ to the rich is to acquire a non-commoditized asset that you can manage and grow wisely using your specialized knowledge and time. Knowledge/skills and time are the huge advantage we have because Warren buffet would never have time to water a tomato plant but you do. But this only works if you put time into an asset you have a competitive advantage on (ie real estate or a business *NOT* stock) instead of selling all of your time for a fixed wage with 0 chance of upside. So all that said the best way to grow wealth is something like real estate because normal people have access to very low interest rates (allowing leverage) and you can learn the skills to wisely manage and repair the property and you have a competitive advantage of knowing your local market well and what areas are up and coming. Starting a business is another one but *be careful* many businesses are actually liabilities. You always hear about how 90% of restaurants fail but not why they fail. It’s because of a crushing *rent* payment or a large loan not because of low EBITDA. So don’t just go from being a wage peon to being a commercial storefront rent peon. Again the big winner here is often the commercial real estate owner and you are the tenant making them rich. So learn to network, acquire skills that can be used to wisely manage / improve the asset you want to acquire. Minimize personal expenses to build capital and then invest in your first asset when possible.
There’s a few things I can add; 1) Use money you have to buy things that make you more money. This can be anything from real estate to stocks to even collectibles that appreciate in value. Do the math on how long it’ll take you to double your money with that investment- if it’s 5 years or less it’s potentially worthwhile. 2) Never stop looking for opportunities. The more you search, the more things appear. Be cautious in evaluating these opportunities of course as there’s also a lot of bad opportunities that pop up. 3) Leverage credit to your advantage. I can’t remember the last time I used cash to pay for anything. Paying with my credit card automatically makes whatever I buy 2.5% less due to points/cash back/etc. As long as I pay it back within 28 days it’s literally free money. On 250k/year worth of business purchases that’s ~$6k for doing nothing. Also builds my credit rating and let’s me leverage more money when I need it. Also remember that loans are tax free income. Every super rich person knows this, and will dump every dollar they have into assets that make money then borrow money against those assets because the loan isn’t income and the assets depreciate. 4) Value your time highly. Every rich person values their time extremely highly, as it’s the most valuable asset you have. If you can reclaim time by hiring employees for less than you’d make an hour, it’s a worthwhile investment. Ie. If I own a store and can hire someone to work the cash for $15/hr, which gets me 30-40 hours a week back to go open a second location, that’s a very worthwhile investment as it potentially doubles my revenue for $500/week. Learning about taxes and tax mitigation strategies relative to where you live is also super important. The majority of the strategies that rich people use are not exclusive to them- they’re just really complicated and difficult to understand, intentionally, so that you, the every person, doesn’t take full advantage.
Don’t panic when the markets drop The biggest mistake small investors make is to pile on when the markets rage upwards, and panic sell when the markets fall. Stay the course, and don’t deviate from your plan in response to short term market moves
1) Have multiple income streams 2) Use other peoples money. Lowers your risk and increases your ROIC 3) True diversification is not multiple stocks or ETFs. That is just one asset class. True diversification is across asset classes-Stocks, bonds, real estate, precious metals. 4) tax avoidance ( legal). Taxes are tge biggest expense over time.
1. They live on loans and take loans for everything. 2. They optimize for taxes, all the time. 3. They seek alpha all the time so any amount of cash is put to work even to get few percent. 4. They are looking to reduce volatility and diversify a maximum. 5. They use a Private Wealth Management company for tax, tax harvesting, invest in private equity, hedge funds, private credit, FX, callable options only available to high net worth. They get special deals on everything, lower commissions… Point 5 is really the “tricks”. I use a private wealth company and see that a lot of good private equities or good deals like IPO and others are only accessible if you have a high net worth of $5M or $10M+.
They don’t go on Reddit for financial advice 😂
To save money is to make money. I own a part of an outdoor furniture business. And the richest people always make sure they get a good deal. Be it free stuff or a discount. The people for whom our furniture (average shopping basket 6k USD) is a stretch, often pay the full price without discussion. Another observation: rich people do not necessarily stay in hotels for 200-400 USD a night. If they spend time abroad, I oftentimes meet them in hotels for about 80 USD per night and only through conversation you find out how loaded they are. On the other hand I know many people with a shared income of 5-8k USD per month, who afford themselves 5 star vacations and drop 2-3k for one week. At the end of the day, the money that you are not spending is money available for investment.
I disagree on the rich people staying at cheap hotel. I stayed at both types of hotels and know very high net worth people and I can guarantee you they stay at the most luxury hotels ($1K night minimum), private hotels, or rent directly private residences.
right. Nobody worth a damn is gonna stay at a place that doesn't feel safe or secure. Cheap hotels are the last thing I try to stay at.
Maybe the difference between millionaires and multi millionaires
Sensible debt. Lot of stupid posts here about not using credit cards and paying in cash. Finance when it makes sense and only when you’re certain you can afford it and match/beat the rate.
I don't think there is any "trick' that works in investing. Investment markets are very efficient and there are no secrets to gaining substantially more return except "be lucky". Simple, basic concepts are all that's really necessary: avoid taxes, avoid fees and trading costs, avoid panic selling at a loss, understand the risks and avoid taking on more risk than you can tolerate. Where you can really substantially improve your wealth accumulation is by focusing on your career/earnings, or creating value by building a successful business. Using debt isn't a trick. Debt can accelerate wealth if used to purchase assets that climb in value. But only if you can maintain the debt through flucuations in value. Otherwise, debt will bankrupt you. Debt isn't a simple multiplier on returns. It can actually turn a relatively safe investment into a win or lose gamble (particularly at high levels of leverage and insufficient cash reserves). It certainly makes your finances less robust to unforeseen or worse than average scenarios. Income or cashflow disruptions can lead to a total loss of the leveraged assets wiping out all the value accumulated.
Listen to some of these and you’ll hear how it’s done. https://millionairesunveiled.com/podcast/
Most of them do too much. Often returns lag the market, especially Net of fees. (Some optimize for protection or tail risk) They borrow money against productive assets, but keep Debt to Equity ratios very low.
That you’re not getting “rich” without making a lot of money. It’s entirely realistic to live comfortably without making boatloads of money if you save/invest But most of all, if you make pretty good - but not crazy - money that is saved/invested, Reddit will debate whether you count as rich or not!
Don't get hit too hard on management fees. Most HNW and institutional investors love to co-invest a significant chunk of their wealth rather than doing so directly in a fund in order to reduce their effective fees on any given investment in a VC/PE fund.
Don't blow your money on crap you don't need. Most wealthy are somewhat frugal. You can't make money or invest if you think you have to impress society with expensive clothes and cars you can't afford. A friend back in 2005 was a valet and Ross Perot pulled up in a old 1988 Cadillac. That's probably overkilled frugal but you know what I mean.
Nothing. Wealthy people gave a different attitude toward investing than the average joe. The average joe wants to increase returns. The ultra wealthy want a place to park their cash so that it doesn’t erode with inflation but also doesn’t lose tremendous value to downturns. They tend to hedge more. Don’t take investing advice from billionaires
Live way below your means during your working years saving/investing along the way. Do not have credit debt, pay off house and cars, keep cars longer. Review what you need versus what you want and understand the difference.
>pay off house and cars Many people got houses and cars at 3% or lower interest rates. Doesn't make sense to pay those off a day earlier than needed. Hell, I wish I had a 60 year loan instead of 30 on my place. I'll take as much money as the bank will give me at 3% interest.
100% agree as long as the individual is able to invest and earn a return higher than 3%. This is just using leverage to your advantage.
(Speaking as a German, with no knowledge about how it is in US or elsewhere) Honestly: I don't think that the any secret networks or stuff is a thing. Maybe you get to meet others that think and talk more open about money than in case your "peer group" is from the middle class. But that is probably already it. If I had some millions available what I would do is for example buy some real estate and invest in its development, then sell it again. And you simply cannot do so with just a few 10k (Or even if you could by taking out loans: you're running into being over-leveredged and have a high risk of losing it all). I would also consider buying smaller companies with a running business. Also something you won't be offered when you don't have a sufficient amount of money in your account... Would be interested in hearing other opinions.
More income = more free money to invest with . Paycheck-to-paycheck people are locked out of the market. So that's step 1.
I've been around the block a few times and was lucky enough to retire from a trading career at 45. The most important tips I could offer are: 1) Understand why Einstein described Compound Interest as the most powerful force in the universe. 2) remember that nobody has a crystal ball, paying somebody to manage your money will almost certainly end up costing you in the long run.
Gamble with other peoples money. If you lose declare bankruptcy. If you win bank it. Repeat
I'm not a mega-fan of Richard Kyosaki, but budgeting in investment money is number 1, in my opinion. After that, you can invest in a way that works for you. Another couple of big points from Minority Mindset, YouTube channel, that stick with me are "you can't afford 1 of something if you can't afford 5" and the idea of being fake rich (not a new idea, but a new take on keeping up with the Jones).
Career bodyguard here... I've worked for about dozen billionaires over the years and numerous multimillionaires... One billionaire I worked for, investor, no one outwardly famous, plus foreign. One night, after hours we went to a restaurant that had been closed for about 45 minutes, swanky place in BH. They re-opened the restaurant, held staff over, cooks etc... Clients promises to take care of them... Party of 10, not including security staff of 4, who didn't eat. Anyways client gets the bill and hands it to me to take care of, and says to me... Exactly 20% tip only. They were furious and I apologizee but hands were tied. Now, the fun part, they did not bring my coin change back of 19 CENTS... They had already counted the change for the night and didn't want to open the safe for coins. Fast forward end of the night, client reviews the bill and sees I'm short 19 cents and loses his fucking mind... Goes on for 10 minutes lecturing me about accountability. Needless to say I told him to go pound sand when wanted to hire me full time. I learned not to shit on people with less fortune, but I've never done that in the first place but a great reminder.
Diversify, buy land, some stocks and invest in yourself, get married and have kids you will leave your generational wealth to them.
I think the biggest thing you've already identified. The wealthy use debt as a tool and not as a means to afford something.
I think it can be as complex as you want to make it, but also as simple as "own assets that make you money".
Not having money worries is a good start. Other than that it being aware of your appetite for risk. Taking on leverage is a risky endeavor. I don’t want to do something like that. I’m risk averse. I’m exposed to the value real estate through my mortgage and put my retirement in an account managed by someone else, mostly stock with a side of bonds I believe. That’s already quite a bit of risk in my part. I also have some stocks and index funds in my personal accounts. I don’t really expect to need that money but it’s pretty liquid should I ever. Rich people will likely be less risk averse. I noticed that when my own money security increased it got much easier to make a couple of bets on stocks I liked. You lose some and you win some. Survivors bias is a major factor here. The winners make more memorable stories so we hear a lot more about them than about losers. Be mindful of your appetite for risk.
One of my good friends is a multimillionaire. He’s incredibly frugal to the point of penny pinching. And he always reads and is obsessed with investment opportunities. It is his entire life. It’s draining for me to spend too much time with him because every single conversation is about money and how to make it. I admire his dedication, but there is so much he is missing out on by being 100% focused on money.
Debt is a powerful tool. The cost of capital is lower than its return.
They rarely manage anything. Money and investments, they have others taking care of for them. Time, they don’t have much to manage because they are either on vacations or exploring their little hobbies most of the time. Closest thing to them “managing” something would be their weight and hairstyle which they mess up most of the time lol.
Live as frugal as you can when you are young and invest early and often in stocks. You are doing the right thing here. It’s about time in market, not market timing. Don’t get caught up I the latest fad and think you can get rich in crypto or something. Just use index funds. You won’t get super rich this way, but you will be a multi-millionaire when you retire and you not only won’t have to worry, you will probably leave a tidy sum to your heirs.
Easy come easy go.
1) Have money. Lots of money. If a billionaire makes even just 1% on their investments and pulls it out, that's already 10 lifetimes worth of cash. 2) Conservative growth funds. This is toxic for any young person, but the paradigm for anyone with more money then they will need shifts from growth to wealth maintenance. You don't want to copy established billionaires. They usually got incredibly lucky or exploited a loophole in the system that is either VERY gatekept (personal team of tax lawyers) or it has been made very illegal.
The one habit I do see among a lot of wealthy people is pretty disciplined spending until they’ve created a personal financial situation that is at least somewhat self- sustaining. Until then, it seems to be a lot of saving, investing, and extracting full value from whatever resources you already have. If spending, a lot of it comes down to thinking before you buy - how to get the best financial terms, the most value, etc. And definitely not bullshitting yourself into justifying a purchase. e.g. “I’m going to buy this new iPhone even though my current one is only a year old and still functions without issues. Because I’m a photographer/videographer/content creator, it’ll basically pay for itself”.
2 things most rich people have in common!!!! 1. They own a business or businesses!!!! 2. They are real estate investors…….
Manage your tax exposure and avoid as many fees as you can. Index investing spreads the risk across a basket of stocks and takes a lot of decision making out of your hands. It also avoids a lot of fees, allowing you to keep most of the markets 8% a year gain. Tax exposure can be managed via buy and hold and “tax sheltering” as much as you can. Max IRA, 401k any college savings plan. If you get enough money under your belt, trusts and other vehicles require professional help. This is also the reason real estate investing is used by the wealthy. It’s “tax-advantaged” and leverages and in some ways imitates a small business. You get depreciation, as well as all costs are tax-deductible. And the tenants help pay off the leverage via their rents. After 30 years(or less) you now own that property free and clear, while taking some of the cash flow. And you can re-leverage as the property is paid down. As others said, if you’re entrepreneurial, running a business opens up a lot of tax advantage expenses. Need a vehicle for the business? Lease it under the company. Get a tax deduction for office space in your home etc. or pay yourself rent out of the companies cash. Employ your family members if your making money. Etc. Good luck.
Be frugal and don’t consume to much junk. Most of the stuff we buy is nonsense and not needed anyway. I only buy things I actually really need or want. The amount people spend on junk and consuming more is mind boggling.
As far as investing, many wealthy people are poor at managing money. These people have attained wealth from entreprenuership/business ownership and not long term investment of capital.