5 Things the Wealthy Know About Money That the Middle Class Doesn’t

Knowing all about money isn’t just for the wealthy – it’s for all of us. But that doesn’t mean the rest of us can’t learn from the rich. The financial principles that keep the rich rich are accessible to all of us.

Learn More: 6 Money Moves You Must Make If You Want To Be Like the Wealthy

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GOBankingRates spoke with financial experts to uncover five key things the wealthy know about money that the middle class often doesn’t.

Money mistakes the super wealthy never make - that you might be doing now.

Home and Vehicle Purchases: Emotional vs. Financial Decisions

Saundra Curry, co-founder of BC Holdings LLC , pointed out a difference in how the wealthy approach major purchases: “One of the cornerstone principles of wealth accumulation is the prudent management of major expenditures, particularly in the realm of homeownership and vehicles.

“While it’s common for Americans to succumb to the allure of upgrading their residences every few years, driven by factors ranging from employment changes to status-seeking desires, this tendency is often more emotional than financially sound.”

Instead of viewing homes as wealth-building assets, Curry said the rich think of their primary homes as places to live rather than “source[s] of wealth accumulation and vehicles as merely transportation.”

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Early and Consistent Retirement Savings

Kyle Enright, president of Achieve Lending , emphasized the importance of early retirement savings.

“They save for retirement early and … look at it as ‘saving to provide options,'” Enright said. “In other words, it’s looking at having money to do what you want, when you want — not just the goal of stopping working at a timeframe that might seem too far off for a young adult.”

To illustrate the power of early saving, Enright provided an example: “Let’s say you start with $500 and then save $500 monthly in a savings vehicle that earns 4% over 40 years. With daily compounding, you’ll have more than $595,000 in 40 years. Start with $1,000 and save $1,000 every month, and you’ll have almost $1.2 million. But if you save the $1,000 monthly over only 20 years, you end up with just $369,000.”

Thomas J. Brock, CFA, CPA and expert at Annuity.org , agreed.

“[Wealthy individuals] invest as early and for as long as possible to generate ‘interest on interest’ and accelerate the accumulation of wealth,” he said.

Goal Setting and Strategic Spending

The wealthy are more likely to set clear financial goals and align their spending accordingly.

Enright said, “They continually are thinking about and setting goals for what they want to achieve in their lives, then develop spending plans to help them get there. Some goals might be smaller and short term (maybe it’s updating a kitchen or bathroom); some will be bigger and long term (funding children’s college educations or starting a business).”

This goal-oriented approach helps maintain financial discipline.

“It’s about keeping focus on the goals that are important to you,” Enright added, “which develops the discipline to take steps — big and small — to exercise care with your money.”

Strategic Use of Debt

The wealthy have a different perspective on debt. As Enright explained, “The only debt they might carry is ‘productive’ debt. Productive debt is debt that adds long-term value, and could include mortgage debt, some student loan debt or business debt – as long as payments are manageable, limited and fit into one’s budget.”

He emphasized the importance of avoiding high-interest debt: “In almost all cases, they are not carrying credit card debt. Doing so is counterproductive to wealth.”

Investing for Multiple Income Streams

Echo Wang, CEO and co-founder at EpicBooks , highlights a key difference in how the wealthy approach extra income.

“The difference is that every dollar beyond core necessities is invested to create more money. That’s what the wealthy do differently,” Wang said. “Most middle-class people live almost paycheck to paycheck, upgrading their lifestyle every time a raise or bonus hits — whereas the wealthy use extra money to buy more income-producing assets.”

Dutch Mendenhall , author and founder of RADD Companies, agreed: “They don’t just earn it – they make money work for them. They know that saving on taxes, investing smart, expanding income streams and managing their lifestyle is the name of the game.”

Aaron Cirksena, founder and CEO at MDRN Capital , reinforced this point: “Money is a tool. It’s meant to be lucrative, meaning if you use it properly, like investing it and spreading it across assets, it is going to produce you much more than if it were to just sit in your savings account.”

Cirksena added an important distinction: “The wealthy take it and invest it so it can grow. They also understand that a high income does not mean you are wealthy. It is how you manage that income that allows you to accumulate wealth and build your net worth.”

This article originally appeared on GOBankingRates.com : 5 Things the Wealthy Know About Money That the Middle Class Doesn’t