7 ways to invest like you’re rich, even if you’re not yet

The average American says they need an annual income of $520,000 to feel rich, according to Bankrate’s latest Financial Freedom Survey. While earning a lot of money may make you feel rich, there’s no amount that you can’t outspend. So, if you’re not transforming your high earnings into actual wealth, then you’re not a member of the rich but rather just a high-wage-earner.

If you’re not rich – and most of America isn’t, even if the average American household has $1.1 million – then you’ll need to build wealth. Everyone has to start somewhere, and one of the best places to begin is to imitate those who do it.

If you want to be a runner, then you start running, even if you don’t know how at first. It’s the same with becoming wealthy – emulate the strategies of the wealthy to grow your own wealth. (Working with a financial advisor can help you set up a game plan to meet your wealth goals.)

Here’s how to invest like the rich even if you aren’t there yet. 

1. Take more risk

One of the biggest advantages of having wealth is that you can take more risks with investments that have higher long-term returns. If you’re piling money into high-yield savings accounts and CDs each month – even high-yielding accounts – you’re losing out over time on the returns on stocks. The stock market, as measured by the Standard & Poor’s 500 index, has returned an average of 10 percent annually over long periods – way more than you can make in a bank.

Being able to take that extra risk means compounded returns over time, enabling the rich to get richer. But even small investors can start investing with the best brokers for beginners.

2. Invest with a long-term mentality

The rich also have a long-term ownership mentality when it comes to their investments. They’re not thinking about making a great score from a quick trade today but about building wealth over time. And time is something that people, regardless of economic class, can take advantage of.

Time is your biggest ally when it comes to investing, and you can compound significant money even without having the very best investments. So when you hear about the world’s wealthiest people, it’s important to understand that even they built their wealth over decades, if not longer.

3. Let a financial advisor do the work

One of the advantages of being wealthy is that you can outsource your investing to professionals who know all the ins and outs of that world. The best financial advisors know how to maximize your gains, how to minimize your taxes and how to help clients plan their financial life.

A financial advisor allows the rich to focus on other activities that build their wealth even more or focus on other areas that provide meaning, such as spending time with family. Bankrate’s financial advisor matching tool can match you with advisors in minutes.

4. Invest first, spend later

It’s not only what the wealthy invest in but also how they invest that drives their fortunes. Investing in productive, wealth-building assets takes priority over spending. Those who are building wealth focus on owning assets that increase in value over time rather than on consumption today.

Many of America’s millionaires drive humdrum cars and live in modest houses – not the flashy Lambos and opulent mansions that you see in Hollywood films and on social media. These people built their fortunes by focusing on investing first and living below their means.

5. Stuff those retirement accounts

Retirement accounts are another great tool the wealthy use to grow their money. The best retirement accounts let you reduce or eliminate taxes on your investments, letting you compound your money for decades. You can save tens of thousands annually in these special plans and then invest your money in potentially high-return investments, such as stocks and stock funds.

For example, with a traditional 401(k), you can invest up to $23,000 (in 2024), while those aged 50 and older can put away an additional $7,500. On top of that, many companies offer thousands more in free money as part of an employer match. The wealthy are taking advantage of it all.

Any American with earned income can also take advantage of an IRA to save thousands more. However, it is important to note that there are income limits that will impact the tax deductibility of a traditional IRA, and Roth IRAs have income limits that affect the contributions you can make.

6. Plan for emergencies

It’s not all good times, not even for the wealthy. So, as they’re planning for the future, they anticipate the good times as well as the bad. By planning for emergencies, the wealthy allow their high-return investments to keep on working for them rather than having to sell when the market is potentially down.

Some wealthy people keep an emergency fund with several months’ worth of expenses so that they don’t need to tap their assets in tough times. Experts recommend six months of savings, and those funds can be stored in a high-yield savings account to help max out the return and minimize the opportunity cost of holding cash. Other wealthy folks build up cash-generating assets such as bonds and dividend stocks to be sure that income is always coming in, even if they aren’t working.

7. Invest in yourself

One of the smartest investments the wealthy make is in their own skills. If you have an interest in a certain area, you can upgrade your skills, whether through courses or even professional schools, such as law school or business school. This investment has the potential to increase your future income and financial security, of course, but it can increase life satisfaction, too.

It can be easy to forget sometimes, but wealth is valuable because it can help you lead a more fulfilling life, not just buy more stuff. By investing in yourself, you can put wealth to work in perhaps the most valuable way. 

Bottom line

Investing like the wealthy is available to many individuals, even if you’re just starting out, and in many ways it’s never been easier. The best online stockbrokers charge no commissions on stocks, and even the best investment funds charge incredibly low annual fees for investors.