Jaspreet Singh hosts the popular Minority Mindset Show, where he shares everyday financial advice for regular people. He recently… posted on Instagram Highlighting one key thing that rich people do that the average person doesn’t. That one thing? Purchase of assets.
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The scope of the problem
According to the 2022 report Consumer Finance Survey According to the Federal Reserve, nearly half of American households have no retirement savings, while the richest 10% of the country owns 93% of the U.S. stock market.
There are several reasons for this disparity. One is that the wealthy have more disposable income to make non-essential purchases. Another is that poorer Americans don’t prioritize asset ownership. That’s problematic, as discussed below.
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Why do rich people buy assets?
Wealthy people buy assets because they build wealth faster than cash savings. For example, the purchasing power of a dollar has declined by about 52% since 1995. Over the same period, the S&P 500 stock index has returned 840.5%.
Imagine that in 1995 you had to choose between investing $10,000 in the S&P 500 or keeping the funds in cash. Today you would have $84,050 if you invested in the stock market, versus just $4,800 in purchasing power if you kept the cash.
The math can change depending on the type of asset and the time period being analyzed, but in general, 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 to buy assets?
One reason poorer Americans don’t own assets is that they have less money to buy them. If you find yourself in that situation, 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 getting a side job or a second job. But if that’s not your thing, the best way to proceed is to cut back on expenses to free up space in your budget.
Cutting expenses will be easier if you have a clear budget. Look at how much you spend in different categories and look for opportunities to cut back. Those extra funds will be what you start allocating to asset purchases.
Consume free financial education resources
Singh also advises taking advantage of free online financial education resources. You can check out articles like this one and videos on YouTube or TikTok without paying anything for the advice. This could be all you need to get yourself oriented and move more efficiently toward your financial goals.
As you go along, consider different viewpoints on topics that interest you. The first piece of advice you receive won’t always be your best choice. The more financial content you review, the easier it will be to decide which advice to follow.
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This article originally appeared in GOBankingRates.com: According to Jaspreet Singh, rich people do something that poor people don’t do
