7 Money Habits of the Super Rich That Poor People Could Never Get Away With
It’s obvious to say — the super rich can get away with spending on things those in other classes could never afford to do. If you’ve ever wondered what exactly those things are, you’ve come to the right place.
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From advanced retirement planning to leveraging their assets, below are some money habits the affluent partake in that those with lesser resources could never get away with.
Splurging on ‘Extras’
According to Carter Seuthe, CEO of Credit Summit, the super rich are able to easily afford the “extras” that others often choose not to pay for in order to save money.
“Think of things like valet parking instead of self-park, first class plane tickets instead of coach, hiring a personal chef rather than cooking on their own, paying for hotel room service instead of leaving the mini bar and menu completely untouched, etc. All of those extra things add up quickly.”
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Investing in Insurance Products
“One practice I’ve observed among the well-off — strategically investing in life and health insurance products that offer living benefits — can be overly risky for individuals with lesser means,” said Mark Tigner, licensed insurance agent and president of Tigner Insurance & Associates.
“These products, which allow policyholders to access funds before death, cater to the affluent by providing financial flexibility,” he explained. “However, for lower-income individuals, the higher premiums for such policies could strain their finances without offering immediate tangible benefits.”
Diversified Retirement Planning
According to experts, the approach to retirement planning diverges significantly between the super-rich and those with limited resources.
“High-net-worth individuals often diversify their retirement savings into various instruments, like 401(k)s, IRAs and 529s, taking advantage of tax benefits and compound interest over time,” said Tigner.
He said replicating this without a substantial income could lead to allocation in less optimal savings vehicles due to the lack of access to professional advice and the resources needed to weather market volatility.
High Risk Investments
“Wealthy individuals can afford to make high-risk investments knowing that they have a safety net to fall back on,” Tigner noted.
For those with less, he said attempting to emulate these high-stakes strategies can lead to financial peril. “It’s crucial to understand your financial situation and adapt strategies that are aligned with your income, lifestyle and future needs, rather than mimicking the habits of the affluent.”
Jonathan Feniak, general counsel at LLC Attorney, agreed. “Extreme risk-taking often works in favor of the super-rich, such as high-risk, high-reward investments, but the same practice can lead to devastating losses for lower-income individuals who lack the capital to cushion losses.”
Aggressive Tax Planning and Investment
“I’ve observed a unique investing behavior prevalent among the super-rich: aggressive tax planning and investment in highly speculative ventures,” said Philip Wentworth Jr., co-founder of Rockerbox Tax Solutions.
He said wealthy individuals have the capacity to hire top-tier financial and legal advisors to navigate complex tax codes and exploit loopholes effectively. “This allows them to significantly reduce their tax liabilities through strategic investments in real estate, startups or tax-advantaged accounts, maximizing their wealth preservation and growth.”
“For instance, a client once shared how diversifying into venture capital significantly boosted his portfolio’s performance, a move that requires not just substantial capital but also a tolerance for high risk,” he said.
On the flip side, he said this approach is hardly advisable for lower-income individuals whose financial stability could be devastated by a single failed investment or the inability to weather prolonged periods of no returns.
Using Advanced Financial Vehicles and Strategies
According to Wentworth Jr., the use of advanced financial vehicles and strategies, such as trusts and offshore accounts, can offer the super-rich further insulation against financial downturns and taxation.
“These strategies often come with high setup and maintenance costs, making them out of reach for the average person and potentially hazardous if mismanaged,” he said. “Therefore, while the financial maneuvers of the wealthy can offer insights, they must be adapted with caution, considering the vastly different financial landscapes and risk profiles.”
Leveraging Assets
“I’ve noticed a stark contrast in the money habits between the super-rich and lower-income individuals, particularly around borrowing and leveraging assets,” said John F. Pace, CPA and tax partner at Pace & Associates.
He observed that the affluent often leverage their assets to secure loans for investment or business ventures at favorable interest rates, a strategy that amplifies their wealth exponentially — if successful. “They use their existing wealth as a safety net, which mitigates the risks associated with borrowing.”
Pace said this approach requires a deep understanding of market trends and an excellent risk management strategy, along with the financial resilience to absorb potential losses without destabilizing their overall financial situation.
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