Stop Budgeting Like the Middle Class and Do What the Rich Do Instead

Stop Budgeting Like the Middle Class and Do What the Rich Do Instead

Angela Mae Wed, August 2, 2023 

A lot of people believe all they need to do to become wealthy is to earn more money or to save what they do have. This isn’t all that surprising, considering how many people subscribe to the idea that their income directly corresponds to their wealth.

But what many people who are considered “middle class” don’t realize is that earnings are just one part of the bigger picture. The people who achieve true wealth are those who know how to spend and invest the money they earn in ways that will benefit them in the long run.

If you’ve been living with a middle class mindset and want to make a change, you might need to take a moment to consider the behaviors or actions that keep you from becoming rich. Here are some of the most common things people in the middle class tend to do that the rich do not — and things the rich consistently do to maintain their wealth.

The Rich Invest While the Middle Class Do Not

The middle class tend to save their money, while the wealthy invest theirs.

Robert R. Johnson, Ph.D., CFA and professor of finance at Heider College of Business at Creighton University, gave a historical look at the stock market.

“From 1926 through 2022,” he said, “the stock market provided returns that far exceeded treasury bills or treasury bonds. According to data compiled by Ibbotson Associates, large capitalization stocks — think S&P 500 — returned 10.1% compounded annually. Over that same time period, long-term government bonds returned 5.2% annually and T-bills returned 3.2% annually.

“To put it in perspective,” he added, “a dollar invested in the S&P 500 at the start of 1926 would have grown to $11,535 (with all dividends reinvested) by the end of 2022. That same dollar invested in T-bills would only have grown to $22.05. That same dollar invested in long-term government bonds would have only grown to $130.89. It pays to invest and not simply save. And it’s not a close call.”

Justin Albertynas, CEO of RatePunk, added, “Wealthy individuals also prioritize long-term investing strategies. They are more likely to hold onto their investments, benefiting from compound growth over time. According to a study by Spectrem Group, 75% of millionaires in the US attribute their wealth to long-term investing.”

Middle Class Individuals Rarely Have Multiple Income Streams

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/stop-budgeting-middle-class-rich-150019991.html