Here’s Where Wealthy People Put Their Money

Money Guy Show

This episode of The Money Guy Show reveals where wealthy people actually allocate their money, debunking myths about luxury spending and hig

Key takeaways

• Wealthy individuals prioritize buying back their time through outsourcing routine tasks, not just luxury purchases.
• The top 10% of earners are nearly ten times more likely to invest in equities than the general population.

Main topics

• Wealthy people's asset allocation
• Time as a valuable resource

Notable quotes

"If you want to be wealthy, do what wealthy people do."

"Time is money and money is time."

Conclusion

True wealth isn't about flashy spending—it's built through disciplined habits

Transcript preview

Speaker 2 (0:00) If you want to be wealthy, do what wealthy people do, right? But where do they put their money and what assets do they actually own and what investments do they have? Speaker 3 (0:08) Brian, I am so excited because today we're going to reveal where wealthy people put their money to help them not only preserve, but also grow their wealth. And we're going to talk about the strategies that you can copy to apply to your own financial life. Speaker 2 (0:21) So I'm Brian, he's Beau, and this is The Money Guy Show, where two financial advisors show you there's a better way to do money. And with that... Let's jump right in. Speaker 3 (0:35) Yeah, Brian, according to the Federal Reserve, if you want to be in the top 10 % of wealth in this country, you need to have a total net worth of about $1.9 million. And obviously, you may be asking, okay, if folks have that kind of money, what is it that they spend their money on? Or where do they actually put their assets? And it might not be what you think. Come Speaker 2 (0:56) on, Bo. I've seen enough episodes of Cribs. I mean, we're probably talking yachts, Rolexes, supercars. I've seen enough on my social media feed to have this figured out. Speaker 3 (1:08) Yeah, well, when you actually look at the numbers, what's great is the Federal Reserve actually tracks this data. They look at, okay, well, where do wealthy people put their money? It's not in the places that you would think. And while you may not be in the top 10%, you may not be at that $1.9 million net worth stage yet, I would argue there are a lot of things that wealthy people do that you can copy even today. to start putting yourself on that path. Speaker 2 (1:35) So before we get into the yachts and supercars that I was talking about, you're probably going to start me off with number one, which is they buy back their time. That's exactly right. Wealthy Speaker 3 (1:45) people, they figure out that there is a way to actually exchange their dollars to buy back their time. This doesn't... always mean luxury things. Sometimes it's outsourcing low value tasks they just don't want to do so they can focus on using their time for the things they actually care about. Speaker 2 (2:03) Now, it looks like the content team had to dig deep on this one, but they did find research that shows that millionaires were nearly three times as likely as the general population to outsource. Many of the tasks that they don't enjoy. Speaker 3 (2:16) That's right. This can be things like cutting their lawn or cleaning their house. And so when you're at this level of wealth, you recognize that your time becomes more valuable as your financial circumstances change, as your income increases, as your... responsibilities increase, and as your complexity increases, your ability to buy back your time as those things happen become more and more and more important. Now, Speaker 2 (2:42) I think it is important to put an asterisk on this and say this is not actually what they did to become wealthy. It's just something to note that once they have actually built up a base level of assets that they do outsource so they can use their time as they please. In a sense, they are actually turning their money into time saved. Speaker 3 (2:59) That's exactly right. They recognize that time is money and money is time. So what's the strategy that you can copy? How can you begin to emulate that today? Recognize that right now you are going to trade your time for money until ultimately you get to the point and you build up assets to then where you can start trading your money for time. Okay. Surely the next one is Rolexes, right? Sure. Obviously we've got to have fancy watches. No. wealthy people, when it comes to where they put their money, they actually put their money in the stock market. Speaker 2 (3:35) So if we compare and contrast typical Americans to wealthy Americans, it is interesting to note that 58 % of all Americans own equities. I think a lot of that's probably in retirement plans, like their 401k. But if you actually compare that to the top 10%, 96 % in that top 10 % of Americans do own equities. Speaker 3 (3:54) Yeah, and what's interesting is when we say own equities, I don't think that has to mean individual stocks. It's exactly what you said. They're participating in their employer-sponsored retirement accounts. They're owning low-cost index funds. They're owning mutual funds. And this is actually true because we know that research studies have found that When you look at how millionaires actually built their wealth, most millionaires say this is the way they did it. It was consistent long-term saving and investing via the equity markets. Kind Speaker 2 (4:23) of set it and forget it. Start early and often. And that's why I love that the stats show 80 % of these millionaires attribute it to investing in their 401k. 75 % of the millionaires said regular consistent investing over a long period of time. was a big part of their success. Speaker 3 (4:38) Now, there's two specific things to point out here. Number one, they invested consistently. They weren't trying to go out there and figure out, okay, well, how do I put my money to work today and pull it out tomorrow and trying to time the market? And if you've listened to our content for any amount of time at all, you know we believe that time in the market is way more viable than timing the market. And the numbers... would suggest this. If you think about a $10,000 investment that was put into the S &P 500 in 1987, and it was left undisturbed until 2025, that $10,000 investment would have turned into $616,000. But if you miss just the one best year, you said, oh, I'm worried about the market, I'm nervous, and you just missed the one best year of performance in that timeline, your total would have dropped to $448,000. If you missed the best three years, it drops to $273,000. If you would have missed the best five consecutive years from 1987 all the way until 2025, instead of letting your $10,000 turn into $616,000, that $10,000 would have only turned into $175,000. Now, a Speaker 2 (5:50) lot of you are probably looking at this slide and going, wait a Speaker 3 (5:52) minute, Speaker 2 (5:52) I've seen other... people who create content use these miss the days. We actually took a little different spin on this because a lot of times when you see the same period of time from like the 80s all the way to present day, people will say, what if you miss the best days? Like the best, you know, 10 days, 30 days, six months or whatever. But we were like, in our experience, we don't see that. We don't see people missing days. We see people when markets, you know, get their teeth kicked in, they jump out and they jump out for like. years because they start seeing it go back and they're like, well, it has to come back down. Or you see it the other way where they take a little money and they said, hey, I'm going to take Speaker 3 (6:30) a Speaker 2 (6:30) little profit, put it in my back pocket or in the account and just wait this out because surely the market is overheated. Once again, they don't miss like 30 days at a time. They typically miss years. So we wanted to update this research to show what does it look like when you actually miss the years? And I think you can see very dramatically, it is hard. to get this right is because a lot of people, yes, even if the market's overvalued and you get out, you're more than likely, you don't know when to get back in. And even if you time the market and get out before the next crash, when do you get back in there? That's the problem is nobody has the time machine. So you don't know when to get in. You don't know when to get out. So the best thing to do is just stay consistent and always be buying. Speaker 3 (7:13) That's exactly right. That's why we say always be buying in a way. that you can actually do that is to just automate your finances. Set it up so that it happens automatically without you having to think of it. And what's interesting is when you think about the idea of automating, the second thing that the millionaire study showed is that a vast majority of millionaires invested in their employer-sponsored retirement accounts. It's one of the very best and easiest ways to set it and forget it. You let your dollars come out of every single paycheck and begin going. into tax-incentivized accounts, going into your 401k, going into your 403b, going into your 457. And if you can do that, it creates a natural mechanism where not only are you taking advantage of tax savings either today or tomorrow, but you're also setting a system that can automate and stay consistent no matter what's going on in the world around you. Speaker 2 (8:04) And that's why, because you just laid out a bunch of stuff. I mean, different accounts act in different ways. You've got tax-free growth. You've got employer accounts where they even, you know, prompting or if you think about they're pouring gasoline in the carburetor by giving you free matching money from your employer. So you have to think about when and how should I invest? And just like there's a better way to do math, you have to do PEMDAS to get the right order of operations for math. There's a better way to do money. And that's where the financial order of operations comes in. You don't have to come up with what the best way is. We've already figured it out for you. This is your all terrain, all weather. vehicle that will get you through success. Speaker 3 (8:42) Now, notice what the millionaires or wealthy people didn't do. They weren't investing in complicated life insurance products. They weren't out there trying to day trade or do some sort of algorithmic solution. They weren't speculating and they weren't participating in get rich quick schemes. They were staying steady and consistent. So what's the strategy that you can copy if you want to even employ that type of discipline in your life? Invest consistently in low-cost index funds within tax-advantaged retirement accounts following the financial order of operations. 401Ks, Roth IRAs, HSAs. If you can do that, you will be emulating the same things that got millionaires to millionaire status. Speaker 2 (9:26) So it's worth repeating. Instead of trying to beat the market, just be the market. And if you're curious how much you should save and invest, we'd encourage you to go to moneyguy.com slash resources. download our how much you should save. And all you have to do is look at the intersection points. How old am I currently? When do I want to retire? Voila. It's going to tell you how much you need to save and invest as a percentage of your gross income. Speaker 3 (9:50) All right, Brian. So we're talking about it. The top 10 % of wealth in this country is like $1.9 million. And the question we're asking is, what is it that wealthy people invest in? And are there... strategies that we can copy where we are today to emulate that. And this next one, I don't think is going to be incredibly surprising, but it's a little bit different than one of the things that you hear us say all the time. And when you actually look at the data and actually look at the numbers, it is true that wealthy people do invest in real estate. Speaker 2 (10:18) This one, this one's