Jaspreet Singh is a financial expert who provides free money advice to everyday people. He recently shared some interesting takes on Instagram about how the wealthy manage their assets.
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Here are five of Singh’s key takeaways about how the rich manage their money. Are you already following any of his tips?
Also see the three assets Singh says all rich people own that you should too.
They Give Every Dollar a Purpose
First, Singh said the wealthy don’t just throw all of their money into a single bank account. They make sure to give every dollar they earn a purpose. That purpose could be many things:
- Paying bills
- Adding to an emergency fund
- Investing in assets to build wealth
- Buying nonessentials
- Saving for another financial goal.
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They Prioritize Building Wealth, Not Spending
Singh said the average American prioritizes spending, while the wealthy prioritize getting richer. If that sounds harsh, consider this: The average American spends $3,768 on impulse buys yearly, per Ramsey Solutions. That’s nearly $40,000 a decade.
Imagine putting that money into investments instead. If consistent, you could add upward of $100,000 to your retirement fund throughout a 30-year career. One critical step will be to start tracking your spending more closely. You need to know where you’re overspending before you can stop doing it.
They Make Sacrifices
Next, Singh said the wealthy make sacrifices when it comes to finances. In other words, they’re more likely to delay nonessential purchases in favor of pursuing wealth goals.
“If you really want to become wealthy, you have to prioritize building your wealth first. You’ve to make some sacrifices, and you’ve got to figure out which sacrifices you’re willing to make,” Singh said.
They Invest In Multiple Asset Classes
In the video, Singh also talked about the importance of investing in many asset classes. He names real estate, crypto, the stock market and his businesses among those that he invests in personally.
It can be tempting to throw all of your investment funds into a single asset class, like cryptocurrency or the stock market. But doing so exposes all of your wealth to the same type of risk. The wealthy use multi-asset investment strategies instead, Singh said. This diversifies their holdings into asset classes that react to the same market events differently.
For instance, instead of investing 100% of your wealth into the stock market, you might put 20% into government bonds. If a market crash happened, your bonds would likely go up while your stock holdings would decline. That means you’d lose less money in a recession.
They Run Their Own Races
Finally, Singh made the point that the wealthy follow their own financial wisdom based on their particular circumstances. In other words, they do what’s right for them instead of trying to keep up with colleagues or impress friends.
In the video, Singh talked about how there are wealthy people who use active investing strategies, passive ones and a mix of both. In his view, it’s less important which of these strategies you choose and more about how you execute it over time.
This starts with having a clear understanding of your goals. Are you trying to save for retirement? Buy a house? Or maybe trying to get out of debt? The answer you give can impact which type of investing is right for you.
More Guidance on Active vs. Passive Investing
Passive investors try to own assets that earn them money without ongoing maintenance tasks. Stocks, cryptocurrency, real estate and bonds can all be examples of this, depending on the assets purchased.
Active investors hold assets that they have to manage on an ongoing basis. That could mean buying and selling equities rapidly or starting a business with some friends. Singh says there is no one-size-fits-all solution. Both styles of investing can make you wealthy. It’s about identifying which is a better fit for your goals and preferences.
For instance, if you like trading actively, then go be an active investor as long as you can make money doing it. But if you’d rather buy and hold for years, you can get rich that way too. Regardless of the plan you choose, the key will be picking a strategy that works and sticking to it long term.
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This article originally appeared on GOBankingRates.com: Here’s How the Rich Actually Manage Their Money, According to Jaspreet Singh
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