What Wealthy People Know That the Rest of Us Don’t


































Episode 357 - Do the ultra-wealthy belong to some secret club that no one else knows about? Of course not. But it’s safe to say that they do some things differently. And the rest of us could learn a few lessons from what they’ve figured out.













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Transcript of Podcast Episode 357





Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode: what wealthy people seem to know that the rest of us don’t.
Do the ultra-wealthy belong to some secret club that no one else knows about? Of course not. But it’s safe to say that they do a few things differently. And the rest of us could learn some lessons from what they’ve figured out. Here are a few “unwritten rules” that help keep people wealthy.

* The wealthy spend their money on owning assets, not just consumption. The wealthy prefer to spend money on things that either increase in value or generate income (or both). Spending money on buying—and maintaining—assets may be more boring than travel, takeout, or tickets to a concert, but you can build wealth by prioritizing assets with long-term growth.[1]


* They’re in it for the long term. The concept of delayed gratification is a big one for successful people. They’re in it for the long run. It doesn’t matter if it’s a business, a piece of real estate, or a financial investment. They all need time to grow.[2]


* They avoid unnecessary risks. Wealthy people tend to be cautious when it comes to investing. Once they become wealthy, their focus may shift from accumulating to preserving their wealth. And they pay special attention to inflation. In other words, making money and managing it are two separate skills.[3]


* They try to minimize taxes. It is critical to understand how taxes can drain your wealth, particularly over a few generations. But there are some creative ways to reduce the amount of taxes paid. In 1999, Peter Theil bought a portion of what would become PayPal, using $1,700 in a Roth IRA. The value of the company exploded, and the value of the account grew to $5 billion by 2021. When he reaches age 59½ in 2027, he will be able withdraw any amount he wishes from the account completely tax-free.[4]But that’s only half the battle. Step two is keeping the money in the family for future generations when the federal estate tax rate is up to 40 percent. Life insurance, which can be structured to be income- and estate tax-free, plays a critical role in wealth transfer, and not just for the ultra-wealthy.


* They strive to be financially literate. The wealthy understand timeless financial concepts such the value of investing early, the crushing long term effect inflation can have, and the value of diversification.