It may seem as if rich people have some financial magic or luck that the average person doesn’t have. However, most of their strategies are not that complicated.
While the rich may have more money to work with than you, with the power of compound interest and other strategies, building wealth is something anyone can learn.
Read on to learn seven steps to start building wealth like the rich in 2024.
1. Diversify your investments
According to Khwan Hthai, CFP and certified financial therapist at Epiphany Financial Therapy, investing wisely and diversifying one’s portfolio were the hallmarks of wealth-building strategies in the past year. “This approach, based on the principle of not keeping all eggs in one basket, involves spreading investments across different asset classes to minimize risk while capitalizing on growth opportunities.”
For anyone looking to emulate this in 2024, Hathai recommends starting to invest in a mix of financial products like stocks, bonds, real estate, or even new ones like cryptocurrencies or ESG (environmental, social and governance) investments. Areas to explore are suggested, depending on one’s risk appetite. Tolerance and financial goals.
2. Focus on growth over profits
Hathai said that focusing on long-term growth rather than short-term profits has always been a distinguishing factor of prosperous investors. “(The wealthy) look beyond market volatility to focus on assets and ventures that promise sustainable growth.”
He encouraged a patient and focused approach to investing, where the emphasis is on interest growth over years or decades rather than quick wins.
3. Tax advantaged accounts
Hathai said taking advantage of tax-advantaged accounts is another strategy that has been used effectively by the wealthy to enhance their financial position. “By maximizing contributions to retirement accounts such as IRAs and 401(k)s, individuals can significantly reduce their taxable income while promoting the growth of their investments in a tax-efficient manner.”
Adopting this strategy requires an understanding of the different accounts available and their respective benefits, aligning one’s contributions with their broader financial plan.
4. Try House Hacking
Larry Zhong, personal finance expert and founder of financial startup YeeldAlley.com, said in 2023 that wealthy individuals adopted strategies like house hacking to eliminate housing expenses, which led to a significant increase in their investment capital.
“This approach involves purchasing multi-unit properties, living in one unit and renting out the others to cover the mortgage, effectively reducing living expenses and increasing savings rates,” he said.
5. Invest in CDs and Money Market Funds
Another strategy adopted by the wealthy is to put their money into high yield CDs and money market accounts.
“Savings and CD rates skyrocketed in 2023, and remain high. “Many wealthy individuals took advantage of this by regularly saving and investing a portion of their income and purchasing money market funds and CDs,” said Zhong. “As interest rates remain high into 2024, this strategy will remain a favorite of the wealthy.”
6. Start early
According to Alex Skijas, owner of True Life Wealth Management, one piece of advice that not everyone can take, depending on when they start trying to build wealth, is to start early. “The rich started early. There are some people who have inherited wealth, but those who became financially independent by saving and investing their money started early in life and followed the same strategy, without trying to play the stock market game. Kept.
He said the biggest mistake you can make is “delaying action,” adding, “Start now, saving, investing, and building a long-term financial strategy.”
7. Stay on course
Finally, Skijas points out that wealthy people continue to build wealth by staying consistent with their financial plans and investments:
“Rich understands that the economy, which is affected by presidential elections, geopolitical turmoil and other factors, is completely separate from the health of the stock market and its growth over the long term.”