3 Things Rich People Do With Their Money That You Probably Don't

As of 2022, the average American had a net worth of $1,063,700, according to Federal Reserve data. But when we look at median net worth, that number is only $192,900. This tells us that the typical American has considerably less wealth than $1 million and change. And that it’s probably a smaller percentage of rich folks who are bringing up that average.

In fact, there are some people whose net worth far exceeds the average above. And people in that boat have to manage their money very differently. Here are some of the things the very rich tend to do that you probably don’t.

1. Buy rental properties

Owning rental properties is a great way to generate steady income and grow wealth. But it takes money to be able to buy a rental property. Even if you’re able to get a mortgage, you generally still need to be able to put some money down. And you also need to be in a position where you can afford the upkeep on a rental property.

If you only earn an average wage, you may not be in a position to buy rental properties. But you can still invest in real estate — just in a more creative way.

For example, you can buy shares of REITs, or real estate investment trusts. A lot of REITs trade publicly like many of the stocks you may be familiar with, which means you can buy and sell them in your brokerage account like you would a regular old tech stock.

And because REITs are required to pay out at least 90% of their taxable income to shareholders as dividends each year, they can be a good wealth-building tool for you. That’s because any dividend income you receive is money you can then reinvest.

2. Invest in assets that aren’t available to everyday investors

We just talked about the fact that it’s easy to buy and sell shares of REITs. But that applies to those that trade publicly. There are also private REITs, and other types of private investment funds, that are available to people with lots of money. But you may need an “in” to get access to them, such as having a financial advisor who’s able to put your money into one of these funds. And often, there’s a minimum buy-in. That could be $50,000, $100,000, $250,000, or more, depending on the investment in question.

If you’re an average earner, investing this way may not be feasible. But that’s okay, because you can do quite well for yourself by loading up on S&P 500 ETFs (exchange-traded funds) in your portfolio.

The index’s average annual return over the past 50 years has been 10%. So a $10,000 investment in an S&P 500 ETF today could be worth about $281,000 in 35 years if you score that same return.

3. Make a plan to pass it on

Wealthy people with a lot of assets tend to be meticulous about estate planning. This often goes beyond writing wills. They commonly work with attorneys to set up trusts to pass down wealth efficiently. A trust may not be suitable or necessary for you — though you don’t necessarily have to be super rich to set one up. But there is a cost involved you may not want to bear.

At the very least, though, make sure to have a will in place so you get a say in what happens to your assets. Also, if you’re looking for an efficient way to leave money behind to your heirs, consider saving for retirement in a Roth IRA.

Roth IRAs don’t impose required minimum distributions (RMDs) like other retirement plans do, so you’re not forced to spend your savings in your lifetime. And the rules of inherited Roth IRAs can be pretty favorable to those on the receiving end. For example, withdrawals from an inherited Roth IRA can generally be taken tax-free.

There are certain money management strategies the rich tend to adopt that may not be things you can imitate. But as you can see, there are plenty of great alternatives you can explore even if you’re not wealthy.

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