The term, “the 1%” is thrown around a lot when it comes to talking about the wealthiest people in the world. They use that term as a way to describe how it’s the “1%” that manages the rest of the country because of their financial power and status. Regardless if this term is accurate, this description does more harm than good when it comes to teaching financial literacy and saving money. It shows that people shouldn’t bother trying to become that wealthy.
However, most people would be surprised to know that the tips and tricks that the wealthiest people among us use can be used by anyone. They’re easy enough to implement no matter how many zeroes your bank account has. Perhaps the best part about these tips is that they incentivize you to stay consistent with them as a way to save more money. Now that you know you can use the same strategies that the wealthy use, let’s discuss them more in detail. Here are six ways the wealthy consistently save thousands of dollars.
#1: Setting Up Emergency Funds
For the most part, successful wealth management is about having backup plans. This is one of the primary strategies that save wealthy people thousands of dollars over years. More specifically, setting up an emergency fund is what prevents people from losing huge chunks of their funds. We have to keep in mind that even the most predictable financial environments are unpredictable. This is the idea behind having a safety valve and saving you money in case of a financial emergency.
#2: Investing in Essential Businesses
Speaking of unpredictable times, essential businesses are businesses that are highlighted when the environment around them looks uncertain. This could include financial declines, economic relapses, or any other circumstances of that nature. Their ability to endure is also what makes them goldmines to invest in. When we think about it, investing in these businesses is also a win-win situation. It’s a win on the part of the investor because they save money when times get unpredictable. As for the business, they have the financial backing of investors to keep serving for the betterment of their environment.
#3: Diversifying Their Portfolios
Having a diverse portfolio is one of the oldest strategies when it comes to wealth management and, for good reason. Fundamentally, it’s also a simple strategy to save money. In the end, this reduces the amount of money you lose in case one revenue source suddenly stops. As far as saving money, the more diverse your revenue sources are, the more money you can put aside from collective earnings.
#4: Learning How to Say “No”
Perhaps the biggest problem holding people back from becoming wealthier is the inability to say “no”. To be clear, saying “no” in this instance is in regard to unnecessary purchases. These are purchases that you know you can live without or are added luxuries in your life. Now, this isn’t to say that you can’t put money aside for these purchases. You can set aside a budget for them which will, in turn, save you lots of money.
#5: Establishing Short-Term Savings Goals
Another mistake people make that prevents them from saving like wealthy people is not establishing short-term goals. The majority are under the impression that saving money is a long-term game. While that is true to a certain extent, establishing short-term savings goals allows you to see your progress in real-time. This strategy also allows you to make financial adjustments on the fly in the event you can allocate more money to save or need to spend more money. Think of this strategy as a measurement of success with a safety net.
#6: Hiring A CPA Or Financial Professional
Taxes have proven to be one of the largest expenses you’re going to have. Depending on where you live, you might have to set aside more than half of your yearly earnings from taxes. As we can see, mismanaging your taxes can lead to losing a good portion of what you’ve earned. This is where paying for a CPA or financial professional comes into play.
For most wealthy people, they don’t even bother doing their taxes. They hand their finances off to an individual who is trained at managing the highest tax returns possible. Unfortunately, this can be troublesome too because nobody cares more about your money than you! It’s important to educate yourself about tax reduction strategies so that even if you use a professional you can be sure that at least from a high level your tax situation is being well managed. Clearly, taxes are your largest expense so it pays handsomely to understand your legal and tax situation. So, no matter what your financial situation is, it’s highly recommended you look for a professional and get the necessary understanding to do your dirty work. Let us know how we can help!