Jaspreet Singh hosts the popular Minority Mindset Show, where he shares everyday financial tips for normal people. He recently posted on Instagram highlighting one key thing wealthy people do that the average person doesn’t. That thing? Buying assets.
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Here’s why that matters as you work to grow wealth.
Earning passive income doesn’t need to be difficult. You can start this week.
The Scope of the Problem
According to the 2022 Survey of Consumer Finances by the Federal Reserve, nearly half of American households have no retirement savings, while the wealthiest 10% of the country owns 93% of the U.S. stock market.
There are several reasons for the disparity. One is that the wealthy have more disposable income to make nonessential purchases. Another is that poorer Americans don’t prioritize holding assets. That’s problematic, as examined below.
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Why Wealthy People Buy Assets
Wealthy people buy assets because assets build wealth faster than cash savings. For example, the purchasing power of a dollar has declined by about 52% since 1995. Over the same time period, the S&P 500 stock market index has returned 840.5%.
Imagine that in 1995, you had to choose between investing $10,000 in the S&P 500 or holding the funds as cash. You’d have $84,050 today if you invested in the stock market versus just $4,800 in purchasing power if you held the cash.
The math can change based on the asset type and the period of time examined. But, generally, buying assets helps people perform better financially. That principle holds true whether you have $1 million to invest or $1,000.
What If You Can’t Afford Assets?
One reason why poorer Americans don’t own assets is that they have less money to buy them. If you’re in that position, Singh recommends taking the following two steps as soon as possible.
Cut Your Expenses
If you don’t have money to invest today, where can you get it from? There are two main options.
First, you can try to earn more money — perhaps by picking up a side hustle or a second job. But if that’s not for you, cutting expenses to free up space in your budget will be the best way to proceed.
Cutting expenses will be easier if you have a clear budget in place. Note how much you’re spending across different categories and look for opportunities to cut back. Those extra funds will be what you start putting toward purchasing assets.
Consume Free Financial Education Resources
Singh also advises taking advantage of free online financial education resources. You can review articles like this and videos on YouTube or TikTok without paying anything for the advice. This could be all you need to get your bearings and make more efficient progress toward your financial goals.
As you go, consider different viewpoints on topics that interest you. The first piece of advice you get won’t always be your best option. The more financial content you review, the easier it will be to decide whose advice to follow.
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This article originally appeared on GOBankingRates.com: Wealthy People Do This One Thing That Broke People Don’t, According to Jaspreet Singh
