The majority of people have this evil outlook on people who end up getting rich. This is not going to be that site. Do you know what it is like to grow up with little to nothing surrounded by people who clearly have more than you? This was a common thing in my childhood and I used this as fuel to get where I am today. I am not claiming to be rich, but I have studied enough people and made enough of the right moves to say that I am well on my way. One more bull market in crypto and I have this on lock.
Since I was a kid, I have been obsessed with understanding what rich people do with their money. What i have noticed is that the reason people stay poor is not because they are lazy, they just don’t know how the game works.
I like to make things fun with life (because why not) and look at it from the lens of a video game. In a video game, you know the controls, rules, and what you need to do next to get your character to the next level or boss. The game of money is no different.
What Do Rich People Do With Their Money?
Rich people often deploy many strategies to manage, maintain, and grow their wealth. In the context I am looking at it, playing the game of wealth is completely different than what most people would think. When I think of rich people I think of flexing, nice cars, big houses, and a lot of noise. Wealthy people hide in the shadows (if they can ex: Mark Zuckerburg or Jeff Bezos).
Many people who attain large sums of wealth are business owners to some degree but they may also invest and have diverse portfolios. Stocks, real estate, artwork, other businesses, and even cryptocurrencies make up a good portion of this. Additionally, affluent individuals may engage in philanthropy and dedicate a large portion of their resources to charitable causes.
Learn the Game of Money
Money serves as a medium of exchange.
It serves as an exchange for goods and services and allows for efficient ways to transact with people. The key thing that the rich understand is that they make money work for them. Instead of always working for money, we need to learn the ins and outs of how to make money work for us and have enough delayed gratification to see the work compound.
Building Wealth vs Being Rich
Wealth accumulation is what you should be after, not necessarily being rich. You would almost always classify those that are wealthy people as rich but that would not always be the cases if it was flipped around, now why is that?
My thought process is that anyone can be rich. Being rich in my eyes is having a high income. High earners do not necessarily always have the best spending habits and end up experiencing lifestyle creep because of their inflated income.
Wealth is built through the accumulation of assets. Owning businesses, real estate, having a large portfolio, or having a massive art collection on top of earning a lot of money puts you on the path of being wealthy.
I am sure you know a lot of “rich people” but most of them may have nothing to show after it is all said and done because they buy the cars, the house, go on the trips, and do everything but protect their future through the accumulation of assets.
I don’t know about you, but my goal has (and always will be) been to go for being wealthy. I would rather invest my money so I can enjoy my life later down the road than get off of short term pleasure that comes at the expense of the future.
Set (and Stick) to Goals
Something that I have noticed about my friends who would be considered successful or rich versus those who are money-challenged is that the rich people I know are very serious about goals and sticking to them. It is a quality that comes up time and time again.
If no one has told you this, let me be the first. Getting rich is a process and in majority of cases, it took a decade plus to get where they were. All the money is made in the compounding, all of it.
That goes for almost all areas of life.
Doesn’t matter whether it is health, money, or business, if you are serious about it (and stick to the plan) the likelihood you attain what you set out increases drastically. They say that the investing game (and business) is just a game of attrition. Most of the time, the “best” and “most talented” don’t make it, it is just those who had the guts to stick around the longest that come out on top.
All the rich people I know are like that. No exceptions.
What Asset Classes Do Rich People Own?
It is hard to pinpoint if rich people just own one type of asset class because the fact of the matter is that they typically don’t just own one. It is not uncommon to see someone who has made the majority of their money in one vertical and then diversify to lower their risk.
There are many assets that are out in the world at this time and in all honesty only continue to increase due to technology like blockchains allowing for almost anything to be deemed an asset. Real estate investments, equity, securities (stocks), businesses, fine art, and cryptocurrencies all could be lucrative investments for people in today’s world.
Let’s look at various investment avenues that present themself in the world today and are the backbone of many self-made millionaires’ portfolios.
Businesses
Business is the best way to build wealth in America. Typically, you don’t even make the most money in the process of growing or running the business, what you are really after is the liquidity event (the sale of the business).
Yes, along the way if you are building something big enough you can pay yourself a handsome salary, but for the majority of people that start out, that will not be the case. Most of the money you will make will be in the initial sale of that first or second company that was built.
Real Estate
Most self-made millionaires have made very lucrative investments in real estate. Real estate investment is a lot harder to get started with in today’s world but buying opportunities are always presenting themself. While the majority of people will have most of their net worth tied to personal real estate properties, many of the rich and wealthy have investment portfolios with these tangible assets.
Creating your own investment strategy is not as challenging as it may appear. Once you learn and understand the game of money, pick an expertise to go down. The road to riches is always paved with different avenues.
Saving
Let’s make this clear, you will never get rich saving money.
I will repeat. You will never get rich in saving money.
While we do believe that savings is a crucial part of this whole equation, we do not live in the 1960’s anymore. Unfortunately, our government likes to print money and devalue the currency over time so it incentivizes those who know how the game works. We live by a rule of having at least 3 to 6 months’ worth of living expenses in an account pretty much at all times.
Saving an emergency fund is a must and creates a layer of security for our mental well-being.
Investing (Stocks, Bonds, and Now Crypto)
Stocks and crypto are the most common things are aware of that rich people own. You could probably throw real estate in this bucket as well, but what the masses don’t know is the benefit of having bonds in their portfolio especially if you get rich and want to just preserve the wealth.
Bonds are some of the safest assets on the planet. During times when rates are high, bonds are an excellent way to keep your money safe and earn interest, thus furthering your path of staying rich. Getting rich and staying rich are two completely different games, when you see someone who has gotten rich you will more than likely see bonds in their portfolio to help preserve what they have and help combat inflation.
Alternative Investments (Art & Collectibles)
Art and collectibles typically make up a smaller portion of rich people’s portfolios but in some cases, people have extravagant alternative investment portfolios to showcase. In recent history, trading cards, artwork, and even NFTs have been shown to be great status goods that act as alternative investments for people with the means to invest in this asset class.
The nature of those classes of assets is that they are much harder to sell and are typically illiquid. Many have been working on this problem and creating a means to add liquidity to the market. Masterworks is the most well-known platform for investing in the artwork of some of the largest names in history. I believe that as the NFT space matures, many new methods of investing in things like art, trading cards or even exotic wines will be made much easier to both buy and sell.
What is the Best Time to Buy or Sell Assets?
There is never a good or bad time to buy assets. The fact of the matter is that there will always be some kind of excuse as to why someone can or cannot buy a certain asset class. be methodical in your approach. Do your homework about the investment opportunity, if it makes sense on paper and numbers work out in your favor, then it could be a good time to buy.
You will never be able to time the market perfectly. Setting rules for yourself or creating systems that you do not have to think about to execute for you is your best bet.
Most investing apps out there today have some form of automation for buying assets, research shows that dollar cost averaging (DCA) is th best way to build wealth over a long period of time.
The hardest part in this equation is not the buying part, it is in the sale. There is so much that get wrapped up in the sale of an asset.
“What if it goes higher?”
“Is this a good time to sell?”
“Should I sell it all?!”
There a number of questions that I personally know I have faced when looking to sell an asset. It is harder than it sounds.
The best thing I have done for myself is set hard rules for the sale of assets. here are some of those I personally will be using going into this next bull run:
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I will not even consider selling till we have clear signs the bull run has started (breaking all-time highs)
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I will sell 20% + the initial investment when the assets double in price
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After selling, I will not be buying back in. I will let the winners ride.
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Never go to zero on any asset, ever.
Frequently Asked Questions
Why do the rich get richer?
The rich get richer because they understand the game that is being played. The name of the game is owning assets that increase in value over time. The better you are at managing your money and accumulating assets the better off you will be in the future. The fact of the matter is this, the majority of people either don’t want to take the time to learn about money (insane way to live) or just don’t know where to start (to no fault of their own).
If you are in the latter group, you need to be looking for high-quality resources that increase your knowledge about the topic of money. Books, YouTube, and The Digital Whale Club Blog are great resources for those who want to take advantage of what is available to them. You work to hard in your daily life to not at least understand the basics.
What banks do rich people bank with?
Most rich people have more than one bank account. Each account has their own purpose. The FDIC only insures up to $250,000 at a time per account. In the nature a bank fails, it would be irresponsible to keep more than that amount in a bank that is not reputable with a solid track record. There is nothing wrong with banking with a smaller bank. The largest banks in the United States are Chase, Wells Fargo, Bank of America, and Citi.
Disclaimer: None of this should be deemed financial or legal advice. This content is for educational purposes only and should be viewed as such. This article is written from personal experience that may not be applicable to all parties. Digital Whale Club will not give financial advice.