What are some of the pratical things wealthy people do to save money?

Question

Do they have multiple savings accounts? Are there banks they use that manage the money for them? Do they sign their own checks? What EXACTLY is it do people with money do to manage, save, and accumulate their money ? Or are they just like lower income folks just with a lot of money? Is there a trend that all people with wealth use? example: do they all go to the same broker ? bank?

Answer 1

The trick to becoming wealthy is to spend less than what you earn. It's not how much you earn, but how much you save.

Then, invest the money into a long-term savings plan. My Corporate Finance instructor showed us a compounding plan on a mutual fund. Person A started saving 2,200 per year at 10% interest from age 24 to 32. Person B started saving the same amount per year starting at 32 until they reached 65. Guess which person made the most accumulated amount of money. Person A, because of the compounding of the money.

So, your best strategy is to invest the money into a mutual fund.
Start by figuring out how much 2200 per year divided by your pay periods per year. Then set that money aside until you have about 1,000 to invest. Then set up a payroll deduction or a fund that can be automaticallly deducted from your paycheck. It will hurt at first, but once you get used to this lower amount, you won't miss it, especially if you can do it on a pre-tax basis (because your annual taxable income will be lower).

Answer 2

There are as many types of wealthy people as there are poor people- some people lose it all, some people have a fixed amount they get each month and never deal with it, or really know how much they have and some people use their money to make more money, and the key here to really using it wisely is to diversify- DONT go to the same broker everyone else does- own some real estate, some stocks, some hard assets like gold, and you can be prepared for a stock crash, for example.... have some in high yield but higher risk accounts, and some untouchable in swiss bank accounts. And if you have that much you can afford to pay anyone to do anything you don't particularly feel like doing, like writing checks, or anything else for that matter. But if they are really on top of it, then managing their money can be a full time job. I mean it could be fun, and you could start up any business you wanted to! But the point is, that the type of money they have makes so much money just in interest each year that it accumulates rapidly if they are at all modest in their lifestyles, which of course many aren't and lose it all. Even just $300,000 invested well could pay you a "salary" of $30,000-60,000 a year in interest. Not bad, it's just getting your hands on that 300,000!! but there's lots of stuff out there on the web to read! good luck!

Answer 3

Well, it's not very clear how you would define wealthy. The top 1% of the people in this country own over 90% of the wealth in the United States. If your networth is $1.4 million or higher, you are in the top 1%.

Wealthy people make money. Thet don't just save money. They usually have some equity such as real estate, stocks, businesses etc. are source of their wealth. These equities usually appreciate and value well ahead of the GPI or the inflation rate. Creating wealth involves some degree of risk and a lot of discipline.

IMO, wealth is a state of mind. For instatnes Bill Gates is the wealthies person on earth but I seriously doubt that when he founded Microsoft he was concerned much with becoming wealthy. He had a vision and focused his efforts on brining his vision to fruition. His wealth was a byproduct of developing a unique product and marketing that product. He desired to be the best software vendor in the world, and be better than any of his competition. He played to win and was rewarded handsomely for his efforts in building Microsoft into one of the most successful companies of the 20th century.

You can't rely on a bank or a broker to make money for you. Kowledge and education is the key. You have to know what you are doing and be in control of it. If you invest money in stocks and don't know what you are doing, you can lose all your investment in a matter of weeks. Don't get lure by those informercials that promise you millions in 12 short months. The world of informercials are riddle with scams. They make their money selling those programs. Some of the biggest Real Estate gurus from 10-20 years ago are sitting in prison right now. If you want to really know how the wealthy do it read their biography. For instance, if you want to be a stock expert, real a biography about Warren Buffett. You will get more information from reading about a successful person than you would out of any get rich quick scams.

Last but not least, if you're goal is just to be wealthy, in all probability you will never become wealthy. In order to be wealthy, you have to be very good at something. You can't rely on other people or hope for some luck.

Answer 4

I sense a bit of frustration in your question. Actually there are many ways to save money but he most effective way I have found is to have a couple of different plans. First, Life happens and you always need money for unexpected things. That is where a savings account or money market account comes in. Pick an amount you want to deposit into this account each time you get paid and be disciplined enough to leave it alone. Next the best way to grow your money is to start investing. You will need a broker (I use a CPA) tell him or her you want an investment account that you can start out with a small amount of money (500.00 -1000.00) and that you can add small amounts (100.00 or more) anytime you want without fees. Remember with investments comes risk but there are investments that minimize risk but they also grow slower then higher risk investments. The real secret to wealth is that there is no secret only discipline and questions and the only difference between you and a millionaire is the number of dollars you have. Good Luck

Answer 5

Well Most Rish People Have Saved There Money Sense They Was Young And Added Money To There Bank Account Over The Year's......... Atleast That's How I Done It! And Once I Got A Large Amount Saved I Got Some Cd's At The Bank! So Over Time They Just Gain More And More Money!

Answer 6

The first key to savings and wealth accumulation is to "pay yourself first". This means you automatically put at least 10% of your income into savings/investments. Then you 'live' on the remainder of your income. To do this, set up automatic transfers of 10% (or more) of your weekly, or monthly paycheck into savings/investments. You must make this an automatic purchase so you don't 'cheat yourself' and skip the savings/investing when you want to spend the money on other 'stuff'.

The second key is to live conservatively. If you can afford a $25,000 car, buy a $20,000 car (and you keep it for many years after you pay off the loan) . If you can afford a $400,000 house, buy a $300,000 house. If you can afford a $3000 vacation, take a $1,000 vacation. This way, you avoid excessive debt, and especially, the wrong kind of debt - credit card / consumer debt.

Best wishes and good luck.

Answer 7

I agree with the advice on here, but I will add one trick that no one has mentioned. Wealthy people pay far lower interest on their credit cards than you do. That's because they're debit cards linked to their stock brokerage accounts, and they charge much lower rates. Right now, if you had a stock brokerage account with Charles Schwab, you'd pay only 10.15% interest on your visa card. Of course, wealthy people save money and don't spend it, as others have noted, but that's one trick that's just amazing. I think it takes $5,000 to open an account with them, though.

I recommend the books, "Rich Dad, Poor Dad" and the "Millionaire Next Door." Also read Carlson's "How to Buy Stocks Without A Broker" if you want to invest with little money.

Answer 8

They own a business, instead of working for someone else and paying a bunch of taxes.

It's not necessarily that they earn tons of money each year - but they spend PRE TAX DOLLARS when the poor first pay taxes, then spend the remainder.

But we're fighting back! Get a home based business. Even if you don't make any money for a couple years (the IRS expects new businesses to lose money), you can write off a ton of stuff. Any good CPA will tell you to get a home based business.

I'm in one called USANA Health Sciences. We distribute nutritional supplements and sponsor other people to do the same. I do expect to make money as we grow our business. Right now, I still work full time as a Realtor, but want to retire in a couple years - or sooner.

Let me know if you're interested.

Answer 9

Wealthy people are wealthy because they save money. You'd be surprised at the number of wealthy people who clip coupons, take advantage of sales and do things that require a bit of extra work but reap big savings.

For example...calculate how much you spend each day in the vending machine at work or school. Now, check the grocery ads for the price of a 12 pack of soda...usually 4 12 packs for $10.00. That's .2083 cents per can of soda versus the .75 or or more for each can from the vending machine. If you have 1 soda each day for a month (20 working days) at .75 cents each costs you $15.00. If you purchase those sodas from the grocery store and take 1 with you to work each day you'll have spent $4.17...a savings of $10.83 each month!

If you take that $10.83 savings per month and deposit it in an interest bearing account (even a basic savings account) you'll save $129.96 per year plus the interest that it earns.

You can do this same thing with snacks...instead of purchasing them from the vending machine buy at the grocery store (or if you're a member of a wholesale club even better!) and bag up your snacks each day. If you're pushed for time in the mornings take time on Sunday afternoon to prepare your daily items for the coming week. You'll save time and money and by being concious of your serving sizes you'll keep your weight under control or even loose a few pounds! (Bonus!)

If you keep a spending diary for a week (write down EVERYTHING you purchase...no exceptions!) you'll see where you're spending money you could be saving.

Saving is the only real key to wealth!

Good Luck!

Answer 10

Hi oraleeannie,
I don't know many truely wealthy but I have noted one thing about the few in my aquaintance. They tend to buy the best quality clothes and cars but then keep them forever. They also maintain things like cars to a very high degree.
This makes sence if you think about it. We, the poor, are forced to buy on credit or cheap or both. As time goes by we end up paying interest or keep having to keep replacing our inferior goods. Over a lifetime when you account for compounding and fees those who buy on credit will have a 20% lower standard of living than someone who could aford to pay cash.

Oh! One more thing....they keep their credit score so high that when they do borrow money (usually only for appreciating assets) they get super-low interest rates.

I am really interested to hear other peoples observations on these folks. Good question.