3 Ways the 1% Maintain Their Wealth
It's one thing to become wealthy, and it's another to stay wealthy. Read on to see how the rich do it.
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You'll often hear the term "the 1%" tossed around in the context of personal finance success. Forbes Advisor says that to be in the top 1%, you need a net worth of about $11.1 million. Yikes.
But while it's one thing to build enough wealth to get into the 1%, it's another thing to actually stay there. Here are some of the things the 1% do to retain their wealth.
1. They invest on a long-term basis
Investing money is a great way to build wealth. If you invest $20,000 today and your portfolio generates a 10% yearly return over the next five decades, which is in line with the stock market's average, you'll end up with almost $2.35 million -- based on just $20,000!
But it's not just that wealthy people invest their money to get rich. They also stay invested once they are rich.
In fact, investing is something you should aim to do on a long-term, continuous basis, even if you're nowhere close to the 1%. No matter how much wealth you've accumulated personally, maintaining an investment portfolio could help you hang onto the money you've amassed and potentially set you up to pass some wealth down to future generations in your family.
2. They diversify their investments
Diversifying investments is a great way to build wealth as well as continue generating strong returns within your portfolio. It's also a good way to protect yourself from losses during a market downturn.
Let's say you've put together a winning stock portfolio, but the market crashes. You may be able to minimize your losses if you also have a portfolio of real estate investments.
Of course, you don't lose money in a stock market crash (or a real estate market crash) if you don't actually sell off investments at a loss. So another thing the rich often do to maintain wealth is load up on different assets that continue to pay them, even when market conditions are sour.
Many companies, for example, might continue to pay dividends even when their share prices have fallen. And if you own rental properties, you can continue to receive rental income even if the value of those homes has declined.
3. They steer clear of high-cost debt
Wasting money on high-interest debt means having less money to save and invest. It's important to avoid high-interest debt if you want to both build and maintain wealth. So to that end, aim to use credit cards cautiously. Only charge expenses you can pay off in full, and maintain a solid emergency fund so you're not forced into expensive debt if unplanned expenses arise.
Of course, people in the1% are less likely to have to turn to a credit card when surprise bills pop up. Those in that boat can commonly liquidate investments when a need for cash arises. But it's still wise to avoid expensive credit card debt to the greatest extent possible.
Maintaining wealth takes work. Even if you're nowhere close to the 1%, it pays to do what you can to maintain the wealth you've worked hard to build. And you can use the same tactics the ultra-rich do in that regard.
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