The wealthy may seem to have some financial magic or luck that the average person does not. However, most of their strategies are not all 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 how to do.
Read on to learn seven steps to start building wealth like the rich in 2024.
1. Diversify Investments
Investing wisely and diversifying one’s portfolio was a hallmark of wealth-building strategies in the previous year, according to Khwan Hathai, CFP and Certified Financial Therapist at Epiphany Financial Therapy. “This approach, rooted in the principle of not putting all one’s eggs in one basket, involves spreading investments across various asset classes to mitigate risk while capitalizing on growth opportunities.”
For someone looking to emulate this in 2024, Hathai suggested starting to invest in a mix of financial products such as stocks, bonds, real estate or even exploring newer areas like cryptocurrencies or ESG (environmental, social and governance) investing, depending on one’s risk tolerance and financial goals.
2. Focus on Growth over Gains
A focus on long-term growth over short-term gains has always been a distinguishing factor of affluent investors as well, Hathai said. “[The rich] look beyond the volatility of markets, concentrating on assets and ventures that promise sustainable growth.”
She encouraged a patient and focused approach to investing, where the emphasis is on the interest appreciation over years or decades, rather than quick wins.
3. Tax Advantaged Accounts
Leveraging tax-advantaged accounts is another strategy that has been effectively utilized by the wealthy to enhance their financial standing, Hathai noted. “By maximizing contributions to retirement accounts such as IRAs and 401(k)s, individuals can significantly reduce their taxable income while fostering the growth of their investments in a tax-efficient manner.”
Embracing this strategy requires an understanding of the various accounts available and their respective benefits, aligning one’s contributions with their broader financial plan.
4. Try House Hacking
Larry Zhong, a personal finance expert and founder of financial startup YieldAlley.com, said that wealthy individuals in 2023 employed strategies like house hacking to eliminate housing expenses, thus significantly increasing 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 the rich employed is putting their money into CDs and money market accounts with higher yields.
“Savings and CD rates skyrocketed in 2023, and have remained high. Many wealthy individuals took advantage of this by saving and investing a portion of their income regularly and buying money market funds and CDs,” Zhong noted. “Since interest rates have remained high in 2024, this strategy will continue to be a favorite of the wealthy.”
6. Start Early
One piece of advice that not everyone can take, depending on when they start to try and build wealth, is to start early, according to Alex Skijus, owner of True Life Wealth Management. “The rich started early. There are some with inherited wealth, but those who became financially independent by saving and investing their money started early in life and maintained the same strategy, without trying to play stock market games.”
He said the biggest mistake you can make is to “delay action,” and added, “Start now, saving, investing and making a long term financial strategy.”
7. Stay the Course
Lastly, Skijus pointed out that the rich continue to build wealth by staying the course with their financial plans and investments:
“The rich understand that the economy, which is impacted by presidential elections, geopolitical turmoil and other factors, is completely separate from the health of the stock market and its growth in the long term.”
Thus, they don’t steer away from their strategy of building wealth, buying stocks and keeping them for the long term.
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