How The Wealthy Stay Rich — & How You Can Make Their Money Tricks Work For You

I need to confess something. One of the reasons I wanted to write a book about investing was to get into rooms with experienced, wealthy investors, and the people who advise the uber wealthy, in order to ask them one question: What do wealthy people do differently that your average investor should know? Of course, I was hoping to unearth some secret code to easily and quickly build wealth (outside of developing an app and selling it to a tech giant for billions of dollars), but alas, there is rarely fast money. At least not if you’re playing within the parameters of the law and basic ethics.

But I did come away from some easy tricks that anyone can apply to their own lives. Ahead, four ways the rich build and preserve wealth that we, the common people, can actually enact in our own lives. This isn’t a "get rich quick" plan — it’s a "save a lot and make smart, sometimes daring, decisions" plan. But it still gets you to that ultimate goal of unlocking financial independence and wouldn’t you argue one day is better than never?

While interviewing Jill Schlesinger, CFP and author of Dumb Things Smart People Do with Their Money, for my book Broke Millennial Takes On Investing, she says the dirty little secret is that building wealth is not complicated. People either inherit a lot of money and don’t squander it by living within their means, or they simply start saving early. On her podcast, Better Off, Schlesinger asks guests about the best financial decisions they ever made. Many of her guests respond with some variation on “I started saving early” or “I opened an IRA and kept contributing each year.”

Those of us who won’t be inheriting immense wealth have to use the boring method of starting early (or if not early, now) and being consistent about investing money into the stock market. It’s really easy to start: Just set up a 401(k) or Roth IRA and have money automatically deducted from your paycheck each month.

Of course, it’s just a dash more complicated than being consistent because you also have to occasionally rebalance your investments. Rebalancing is the (theoretically) simple act of getting your investment portfolio back in sync with your asset allocation. Let’s say you’re comfortable with 70 percent stocks and 30 percent bonds based on your risk tolerance and time horizon (fancy way of saying when you'll need access to the money), but your stocks did really well this year so now it’s an 80/20 split. Well, you need to sell 10 percent of your stocks and purchase 10 percent more bonds to balance it back and stay in alignment with your risk tolerance and overall goals.

You’ll also want to diversify your investments so you aren’t just invested in one company or a certain type of companies (e.g. only tech) or even just one country. Patience is, of course, a critical piece here, too. Checking in on your investments daily, even monthly isn’t necessary. In fact, it could be detrimental, especially if it’s likely to spook you and make you want to sell if the market is taking a tumble. Once a quarter or even once a year is a perfectly acceptable amount to take a peek at your investment portfolio.

Wealthy people are in a better position than us regular investors because they typically are more comfortable taking risks with their money. The investing cliché of high-risk, high-reward is rooted in truth, but it’s much easier to take a high risk and still sleep soundly at night when you’re already a millionaire many times over.

Of course, not all wealth is inherited. But it’s often still those willing to take risks who are able to build empires (or at least a high net worth).

Sallie Krawcheck, co-founder and CEO of Ellevest, shared with me a unique strategy on building wealth: get into emerging markets. To an investor’s ear that might sound like she means investing in emerging markets — which is often done by investing in the economics of countries that are yet to be categorized as developed nations. But actually, Krawcheck’s advice goes well beyond where you invest your dollars.

“It’s so much easier for you to be successful and for your wealth to grow if you’re in a company or business that is growing,” she says.

Krawcheck explains that if you’re working for a company that’s growing at 10 percent a year, and you’re an average employee, then you’re growing at 10 percent a year. But if your company or industry is shrinking by 10 percent, then you have to be 10 percent better than everyone else in order to be rising. Picking the right company or industry can have a huge impact on how easily you can build and grow your wealth. Just consider starting salaries for software engineers in Silicon Valley. But, that won’t stay the most impressive for long and another industry will soon be on the horizon as an emerging market.

Okay, let’s be honest. It feels like legally evading taxes is a huge part of how people preserve wealth. And frankly it can be!

Ashley Fox, a financial education specialist and founder of Empify spent her early career working in asset management with clients who were multi-millionaires and even billionaires. She saw everything from people buying art to protect their wealth (and in some cases use a tax loophole of storing art offshore in order to avoid paying taxes right away) to once observing a client save $60 million in taxes by using a complicated, somewhat obscure (at least to us regular taxpayers) loophole called a grantor-retained annuity trust (GRAT). A GRAT enables the recipient of all the money to avoid paying gift or estate taxes, which can save millions-upon-millions of dollars.

Watching — and even helping — the uber rich take advantage of tax loopholes to grow and preserve their wealth made Fox feel like she wasn’t even playing the game, she was just on the sidelines ensuring the players were fit to play. But it also changed her mindset, which to her is a critical piece of how the wealthy build a financial legacy.

Ultimately, a mindset shift is a critical factor in building wealth. We’re not talking about “secreting" or "manifesting” your way to wealth. But, according to Jennifer Barrett, chief education officer for Acorns, there is something to be said about the huge difference between “getting by” and “building wealth.”

Barrett explains that for the wealthy, from the beginning the strategy is “How do I take what I have and build more from that? How do I put this money to work for me?”

Barrett herself had a revelation about mindset when she began to contemplate the question “What is the point at which your basic expenses will be covered from the returns you’re making on your investments? And how much annually would you be willing to live on to reach that point?” Obviously, a lower annual number is easier to achieve. Once Barrett settled on the amount she would need to enjoy financial independence, she was able to crystalize her goals and fine-tune her financial strategy so she wasn’t just investing with the vague hope of putting away enough that she wouldn’t go broke in retirement.

Fox came away with a similar feeling on mindset after working with millionaires and billionaires. “I think we get so consumed with getting rich quick for a temporary fix. Wealth is generational; rich is having a lot of money right now,” Fox says. Even if the wealthy don’t start with inherited money and are truly starting from a net worth of $0 or even a negative number, there’s something that makes them unique.

“Wealthy people don’t operate from a survival perspective, even if they didn’t have money, their mind-sets are totally different,” explains Fox. “What they value, where they travel, what they read, what they do with their time, whom they associate themselves with, it’s all for the betterment of making them stronger people.”