Money Hacks Used by the Wealthy That You Can Also Implement
There are several financial strategies that can be beneficial for people with average incomes, even if they don’t have access to millions of dollars. These methods, often used by the wealthy, can help you save money and grow your wealth over time.
Bank Bonus Harvesting
One effective strategy is bank bonus harvesting. This involves taking advantage of new account bonuses offered by banks. According to Abid Salahi, a finance expert and co-founder of FinlyWealth, this method is similar to how wealthy individuals manage their idle cash.
By moving $5,000 between banks that offer new account bonuses, it's possible to earn between $1,000 to $2,000 annually. Major banks like Chase and Citi frequently provide $200 to $500 bonuses for new accounts with minimal holding periods.
Credit Card Reward Stacking
Another technique used by the wealthy is credit card reward stacking. Salahi explained that combining a 2% cash-back card for regular spending with targeted 5% category cards can generate significant annual rewards.
For example, on $30,000 in spending, this strategy could yield $1,200 or more per year. Additionally, timing sign-up bonuses strategically can add another $1,000 to $1,500 annually.
Tax-Loss Harvesting
Tax-loss harvesting is a strategy that involves selling underperforming investments at a loss to offset capital gains taxes. Nischay Rawal, a certified public accountant and founder of NR Tax & Consulting, has helped many high-net-worth individuals streamline their financial strategies using this method.
This technique allows investors to lock in tax losses while maintaining market exposure. For instance, when index funds drop in value, selling and buying similar funds can offset $3,000 in ordinary income yearly.
Property Tax Appeals
Property tax appeals can also be an effective way to reduce expenses. Salahi noted that filing an appeal with comparable sales data can lower assessments by 5-15%. On a $300,000 home with a 2% tax rate, this could save between $300-900 annually.
This strategy is accessible to everyone, regardless of property value. Even if the appeal is denied, there’s little downside, as you’ll simply be back where you started.
Utilizing Retirement Accounts for Tax Efficiency
Maxing out contributions to retirement accounts like 401(k) plans and IRAs can provide significant tax benefits. According to Rawal, high earners often take full advantage of employer matching programs to build wealth while reducing taxable income.
This approach not only secures future financial stability but also offers immediate tax savings, making it a valuable strategy for people at all income levels.
Zero-Based Budgeting
Zero-based budgeting is another method that mirrors how wealthy families manage their finances. This approach involves assigning every dollar a specific purpose and reviewing subscriptions monthly to identify potential savings.
Salahi mentioned that this strategy typically results in $200-400 in monthly savings. It helps individuals track their spending more effectively, similar to how family offices monitor expenses on a larger scale.
Additional Financial Tips
There are many other ways to improve your financial situation. From maximizing passive income to making smart investment decisions, there are numerous opportunities to grow your wealth. Whether you're looking to save money on everyday expenses or invest in long-term growth, implementing these strategies can make a significant difference in your financial health.
By adopting some of these techniques, you can start building a more secure financial future, even if you’re not starting with a large amount of money. The key is to be proactive and make informed decisions about your finances.
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