- The rich know that in order to grow wealth, it's important to make your money work hard for you -- not the other way around.
- Well, maybe not easy, but there are basic fundamentals.
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They have cash reserves because they are disciplined enough to save. Everyone should aim to build an emergency fund with enough cash to cover six to nine months worth of expenses, Kay said.
You just need to be working toward that goal with every paycheck. With that in mind, arrange to have a set amount automatically transferred from your checking account to savings each month.
Yet those fees can eat away at your returns, Schulte said. If they seem high, the SEC recommends asking whether the costs can be reduced.
You also should shop around for accounts and investment firms with low fees, which can help you keep more of the money you worked hard to save. That means having the right mix of investments, rather than putting all of your money in just one asset.
However, the rich know that asset location is just as important as asset allocation, Schulte said.
Instead, they spread it around. Wealthy people also have investments in brokerage accounts to limit the impact of taxes in retirement, Schulte said.
The types of investments you have in your accounts can have a dramatic effect on your long-term returns, Schulte said. Then, keep your individual stocks in brokerage accounts.
They take steps throughout the year to lessen the impact of taxes.
With the help of tax professionals, the wealthy also avoid making costly tax mistakes. If you have the resources, check in regularly with a financial or tax adviser throughout the year.
Stay up-to-date on the latest news that can affect your taxes, and keep records or receipts that could help you qualify for various tax deductions.