Every individual has their own way of welcoming the new year. Some gather with family and friends on New Year’s Eve, while others choose to travel and immerse themselves in different atmospheres. There are those who prefer to reflect and meditate at home, and of course, some indulge in a big meal followed by a long sleep to relieve the year’s hard work. Many people set out to accomplish things at the beginning of the new year, so what do the wealthy do?
Almost everyone desires to amass wealth, but many individuals have bad financial habits in their daily lives that result in money wastage, hindering the accumulation of wealth.
Wealthy individuals, whether through inheriting family businesses or starting from scratch, have accumulated their riches by preparing for success as they enter the new year. In fact, some financial management techniques of the wealthy are easily applicable for ordinary people – including you.
GOBankingRates interviewed financial planners and experts to gain insights on steps to achieve financial success in the new year and beyond. These experts are individuals who have built their wealth.
Buffett has also warned those aspiring to wealth to avoid financial pitfalls and make wiser financial decisions to ensure their money works for them.
George McFarlane, President of 7 Waters Advisors, humorously remarked that many people find budgeting as appealing as getting a root canal. However, just as a root canal eliminates a bad tooth and prevents infection spread, creating a budget can eradicate the decay in your spending habits.
He suggests starting with reviewing bank and credit card statements, as small impulse purchases can easily add up. From there, categorize expenses into necessary and unnecessary expenditures.
“After categorizing your expenses, set a savings goal for the upcoming year, aiming to increase your savings compared to the previous year,” he said.
As a global success coach at G Corp Advisory, Jacob Galea understands the financial habits of successful individuals. He emphasizes that high-net-worth individuals need to maximize contributions to tax-advantaged accounts like retirement plans and health savings accounts to reduce taxable income and boost savings.
McFarlane states that the wealthy value utilizing extra funds to quickly pay off non-productive debts.
“Instead of spending the extra money on non-essential items, consider using it to repay high-interest debts,” he added.
Wealthy individuals are often very generous, with Buffett famously pledging to donate 99% of his wealth.
Galea notes, “Charity is a common year-end activity for the wealthy, not only for the impact it generates but also for the tax benefits it offers.”
“They frequently donate appreciated assets like stocks to avoid capital gains tax payment while still receiving full tax deductions,” he said.
The IRS allows charitable donation deductions up to 60% of an individual’s adjusted gross income, a prudent financial move and a good deed.
According to Andrew Cordle, founder and CEO of Money Is, the best investment is investing in oneself. The wealthy understand that spending time to study the latest trends in the financial sector is one of the most effective ways to increase assets.
Buffett also believes that the best investment one can make is in themselves. Improving skills and education can significantly enhance income potential. Knowledge and abilities are assets that cannot be taken away from anyone.