Billionaire Phillip Frost Charges $ 27 Million for Fraudulent Plot

Expenses must align with objectives

One of the keys to wealth is achieving goals, said Michael Kay, president of Financial Life Focus and author of "The Feel Rich Project."

"They know what interests them," he said. "Maybe it's passing the wealth to another generation, maybe it helps to achieve a particular lifestyle. They are aware of not wasting resources on things that have no value.

According to Kay, the rich seem to spend money only for things that interest them. The rest of us can learn from this by setting our own goals and then monitoring our expenses to see if they fit those goals.

"Are you really spending on what you like?" Asked Kay. "Do beliefs and realities coexist?"

Do not waste your money to impress others

Most rich people do not spend their time and money trying to impress others. "They are not in a race," Kay said. "They know that they have succeeded, so their attention is not about what others think."

In fact, many wealthy people would not have become wealthy if they had spent their hard-earned money buying things to keep pace with others, he said. Living below their means and rejecting the most expensive lifestyles are the key secrets of the richest people in the country, according to the hit book The Millionaire Next Door: The Surprising Secrets of American Wealth.

Spending money to appear rich even before you actually have it is a surefire way to sabotage your wealth creation goals. So, forget the Joneses and focus on what counts: accumulating your wealth in the years to come. If you're determined to look rich but do not want to spend money, use these insider strategies.

Have a lot of liquidity

The rich make sure that they have sufficient cash to cover their needs in the short term. They have an emergency fund, so "they do not have to disrupt their lives for an unplanned event," Kay said.

The fact that the rich have money for rainy days does not depend solely on their wealth. They have cash reserves because they are disciplined enough to save.

Everyone should aim to create an emergency fund with enough money to cover six to nine months of expenses, Kay said. However, you do not have to put all this aside. You simply have to work to achieve this goal with each salary. In this regard, you must ensure that a fixed amount is automatically transferred from your checking account to your account each month.

"Like anything else, it's a goal," said Kay. "It only makes you fail if you do not work there."

Avoid fees at all costs

Expenses can easily eat away at your fortune. Whether it's late fees on a credit payment, transaction fees with a debit card abroad or overdraft on your account, it's important to avoid unnecessary fees.

"Rich people understand every commission that they pay less money in their pockets," said Taylor Schulte, CEO of Define Financial in San Diego.

Know what you pay in investment fees

The rich are also paying attention to investment costs –
something that many people neglect. According to a study by the National Association of Pension Plan Participants, for example, more than half of workers do not know they are paying a fee on their workplace retirement savings account. However, these fees can hurt your returns, said Schulte.

"The more you pay in mutual fund fees or transaction fees, the less money you have in your pockets," he said.

Even small fees can have a big impact. If you invest $ 100,000 over 20 years and you pay a 1% annual fee, the value of your portfolio will be $ 30,000 less than you would have paid an annual contribution of 0.25%.

Check your account statement for the fees you pay. If they seem high, the SEC's Office of Investor Education and Advocacy recommends asking if costs can be reduced. You should also go around the accounts and investment companies at low cost. Then you will keep more money than you worked hard to save.

The location of the asset is as important as the allocation of assets

If you have read something about investing and saving for retirement, you have probably come across some tips on asset allocation. It means having the right combination of investments rather than placing all your money in one asset. However, the rich know that locating assets is just as important as asset allocation, Schulte said.

In other words, the rich do not keep all their assets in one type of account, such as a tax-deferred retirement savings account. Rich people also have investments in brokerage accounts to limit the impact of taxes on retirement, Schulte said.

Choose the right retirement savings account

You can get an initial tax break by contributing to a 401k plan or the like because contributions come from your pre-tax paycheck – which reduces your taxable income – and the money is subject to a deferred tax. But when you withdraw that money in retirement, it will be taxed at your usual tax rate, which currently stands at 39.6% for the wealthiest taxpayers.

You do not get tax breaks by investing in stocks, bonds or mutual funds through a brokerage account. But if you hold these investments for more than a year, they will be taxed at the long-term capital appreciation rate, which ranges from 0% to 20%, but rises to 15% for most taxpayers.

The types of investments you have in your accounts can have a dramatic effect on your long-term returns, Schulte said. In general, it is best to keep securities, such as bonds, mutual funds and dividend paying stocks, in tax-deferred retirement savings accounts. Then keep your individual stocks in brokerage accounts.

Tax planning throughout the year is crucial

The rich do not wait until April to think about their tax returns. They are taking action throughout the year to mitigate the impact of taxes, Kay said. With the help of tax professionals, the rich also avoid making costly tax mistakes.

If you have the resources, regularly consult a financial or tax advisor throughout the year. Keep up-to-date with the latest news that may affect your taxes and keep records or receipts that could help you get various tax deductions.

Start planning now: 50 tax deductions you do not know

Donate to charitable causes

High net worth individuals also protect their savings by making charitable donations – donations of cash, property or both – throughout the year, Kay said. If you detail your tax return rather than taking the standard deduction, you can deduct the charitable contributions to qualified organizations. The more you deduct, the more you reduce your taxable income.

"Charitable donations are a great tool to mitigate tax consequences," said Schulte. "The rich know it, and you do not have to be rich to do it."

Whether you write a check to your favorite charity or donate clothes that you no longer wear to Goodwill, keep your receipts and claim your deduction for charitable donations.

Or, be more strategic with your donations by setting up a fund advised by donors, said Schulte. These simple, inexpensive funds are available from investment companies and allow you to get a tax deduction when you put money into the account. Then you can make grants by following your own schedule.

It is important to hire consultants

Rich people surround themselves with competent professionals in fiscal, legal and financial matters. To increase your chances of accumulating wealth, do not assume that you must be rich to hire a counselor. On the contrary, investing in a support system now can help you achieve the wealth you want.

"If you continue to use money as a reason for not being on the right track, you will continue to make the same mistakes," Kay said. "[The wealthy] do not try to do everything yourself.

But choose your advisor carefully

Do not skimp on hiring a novice advisor. Kay recommends hiring the best person you can afford so you do not waste money on bad advice. You can locate a paid financial planner near you on NAPFA.org, the website of the National Association of Personal Financial Advisors.

If you do your due diligence and look for your advisor before hiring them, you can avoid losing money. After all, you do not want to be like those celebrities who get ripped off.

Click on to know the daily costs of living as a billionaire.