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16 Habits Of The Wealthy Anyone Would Be Wise To Emulate

- June 17, 2021

View on Forbes.com

Most of us have worked hard and saved carefully to accumulate the assets we have. Similarly, many of the wealthiest people in the world achieved their status through effort and long hours. Amassing a fortune is one part of the equation — keeping and growing it is another. That’s a goal all of us have in common, no matter what our tax bracket.

The very wealthy do have access to some resources that others don’t, but many have also acquired smart habits that help them guard and build their fortunes. These habits can be adopted by anyone who wants to better secure their own nest egg (and who among us doesn’t?).

So, what smart practices do the wealthy routinely follow? Below, 16 Forbes Finance Council members share the frugal and growth-oriented habits of wealthy people that anyone would be wise to copy.

1. Becoming Very Mindful Of Spending

Our most wealthy clients are very mindful of how they spend money. While it is said that money doesn’t buy happiness, we believe that sometimes, it actually does. When we spend money on experiences with family and friends, the returns are significant contributors to our personal well-being. Conversely, spending money on “shiny things” brings a high that often dissipates quickly. – Sharon Olson, Olson Wealth Group LLC

2. Fostering An Abundance Mindset

All investors should emulate the charitable mindset that often defines the wealthy. Are they giving from abundance? Or did that mindset enable them to be wealthy in the first place? The abundance mindset is critical to a proper relationship with risk and money itself. If we work too hard at protecting it, returns will collapse and losses will mount. – Gil Baumgarten, Segment Wealth Management

3. Investing In Real Estate And Land

In addition to investments that earn a return in financial markets, wealthy people also tend to diversify their portfolios by investing in real estate and land. These decisions result in wealth-generating assets that provide a hedge against the ups and downs of the stock market. – Brad Johnson, Cobb County School District

4. Carefully Monitoring The Tax Code

Wealthy people plan around the income tax code. They vet out new tax laws to see how best to structure their finances so that they pay the least amount of tax while following the law. Tax planning can have a significant impact on one’s finances — it will determine how much you pay in tax and how much you get to keep to invest in more assets to generate more income. – Karla Dennis, Karla Dennis and Associates Inc.

5. Consistently Saving And Planning

A disciplined approach to core financial practices and behaviors is the common denominator we see among our high-net-worth clients. They commit early on to saving and investing for the long haul, spend decades adhering to their financial plans and work closely with their financial advisors to pursue their goals. The key is consistency and planning, pure and simple. – Mark Steffe, First Command

6. Being Disciplined About Budgeting

When it comes to financial management, a disciplined mindset is critical. Wealthy people adhere to the 50/30/20 budget rule: Spend 50% on needs and 30% on wants, and put 20% toward savings. Many also have a financial planner to provide education and investment strategies to build a financial portfolio that achieves short- and long-term goals. Saving, investing and living aren’t sprints — they’re marathons. – Greg Mitchell, First Tech Federal Credit Union

7. Autopaying Bills And Investments

Use autopay features for bills and investment accounts. Set up a standard amount each month that gets invested automatically. This accomplishes two things. First, it only really hurts when you have to write the check. Second, it will force you to use dollar-cost averaging in your investments, which will help you lower your cost basis over time. – Bradley W Smith, Rescue One Financial

8. Selectively Choosing Opportunities

The rich are very risk-averse and diligent. They care about detail, and they’re patient. They might have made money by taking risks, but the only way they keep the wealth is by being very selective about the ventures or opportunities they back or invest in. – Jason Hamilton, First River Capital

9. Paying Yourself First

Most wealthy people “pay themselves first” no matter what. Whether it’s 10% or 20% of their income, they ensure the first check they write is to themselves. Then, they systematically invest in different asset classes to make sure their money starts to work for them. – Matthew Meehan, Shield Advisory Group

10. Building A Financial Team

Most wealthy people save 20% of their income each year. They set goals that are meaningful but also attainable. They also build a robust financial team around them, which contains the following professionals: a tax accountant, a wealth manager or financial planner, a tax attorney, an insurance broker, a life and property and casualty broker, a real estate broker, and a mortgage banker. – Michael S. Schwartz, Magnus Financial Group LLC

11. Closely Tracking Interest Rates

Make interest work for you, not against you. Affluent people know that the cost of money is measured by interest rates. Consumer credit can be easy to obtain, but it’s very costly in the long run. Using credit for depreciating assets is not a good idea. Using credit for appreciating assets, such as real estate, usually makes sense. But it’s the interest rate that you need to examine closely. – Todd Sixt, Strait & Sound Wealth Management LLC

12. Practicing Frugality

Believe it or not, many wealthy people practice frugality as a principal financial habit. This virtue helps them save and invest a much larger percentage of their incomes, which in turn helps them become and remain financially independent. – Amir Eyal, Mylestone Plans LLC

13. Making Your Money Work For You

Not all wealthy people have a personal or family history of always having had money, but one of the things that they do all tend to have in common is their knowledge of how to make their money work for them — and doing so with the least amount of effort possible. They create passive income sources, contribute to matched employer benefits and avoid debt unless there are good uses for the funds. – Michelle Prohaska, NYMBUS

14. Refinancing And/Or Shortening Mortgages When Possible

Watch the market and create enough of a buffer to be able to take advantage of special interest rates. When the market takes a dip, check to see if you are able to refinance a mortgage to reduce your interest expenses. If you have the opportunity and the funds, reduce the length of the mortgage. This will create significant savings in interest. – Kelly Shores, GCubed, Inc.

15. Using Debt Properly

Wealthy people understand that debt is an instrument to create leverage. They borrow money at a lower interest rate to invest in assets that have the potential for a greater return. Likewise, wealthy people use debt to purchase assets that can grow in value — not for those that depreciate. Most people would be better off following a similar path. – Justin Goodbread, Heritage Investors

16. Educating Yourself On Financial Matters

Wealthy investors take control of their money. Instead of blindly taking financial advice, they educate themselves. They spend as much time focused on earning money as they do on protecting and growing it. Regarding investing, Warren Buffett famously said, “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.” The key is education — don’t just rely on others to make decisions for you. – Ben Fraser, Aspen Funds

DISCLAIMER

Magnus Financial Group LLC (“Magnus”) did not produce and bears no responsibility for any part of this report whatsoever, including but not limited to any macroeconomic views, inaccuracies or any errors or omissions. Research and data used in the presentation have come from third-party sources that Magnus has not independently verified presentation and the opinions expressed are not by Magnus or its employees and are current only as of the time made and are subject to change without notice.

This report may include estimates, projections or other forward-looking statements, however, due to numerous factors, actual events may differ substantially from those presented. The graphs and tables making up this report have been based on unaudited, third-party data and performance information provided to us by one or more commercial databases. Except for the historical information contained in this report, certain matters are forward looking statements or projections that are dependent upon risks and uncertainties, including but not limited to factors and considerations such as general market volatility, global economic risk, geopolitical risk, currency risk and other country-specific factors, fiscal and monetary policy, the level of interest rates, security-specific risks, and historical market segment or sector performance relationships as they relate to the business and economic cycle.

Additionally, please be aware that past performance is not a guide to the future performance of any manager or strategy, and that the performance results and historical information provided displayed herein may have been adversely or favorably impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be inferred that these results are indicative of the future performance of any strategy, index, fund, manager or group of managers. Index benchmarks contained in this report are provided so that performance can be compared with the performance of well-known and widely recognized indices. Index results assume the re-investment of all dividends and interest.

The information provided is not intended to be, and should not be construed as, investment, legal or tax advice nor should such information contained herein be construed as a recommendation or advice to purchase or sell any security, investment, or portfolio allocation. An investor should consult with their financial advisor to determine the appropriate investment strategies and investment vehicles. Investment decisions should be made based on the investor’s specific financial needs and objectives, goals, time horizon and risk tolerance. This presentation makes no implied or express recommendations concerning the way any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s specific investment objectives.

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DEFINITIONS

Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Intermediate-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Intermediate-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.