The Big Picture on Mauricio Rauld’s Tips For Building Wealth :
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Wealthy individuals prioritize a high savings rate by maintaining a modest lifestyle even as their income grows, allowing for larger investments over time.
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Traditional investment vehicles like 401(k)s may not be the most efficient path to wealth, as they come with limitations such as locked-up funds and hidden fees, making alternative investments like real estate more attractive.
- Building exceptional wealth requires questioning conventional financial advice and actively seeking high-return, tax-advantaged opportunities such as real estate syndications and direct property ownership.
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Most of us grow up with conventional wisdom about money: save 10% of your income, max out your 401(k), and slowly build wealth through traditional investments.
But what if these widely-accepted financial strategies aren’t actually the path to exceptional wealth? According to Mauricio Rauld, a prominent real estate syndication attorney, the truly wealthy approach money very differently.
Save 10%? No. Spend 10%
One of the most striking insights Rauld shares comes from his mentor, Jim Rohn, who suggested a radical perspective on spending and saving. While most financial advisors recommend saving 10-30% of your income, Rohn claimed he couldn’t spend more than 10% of his income because it would be “obscene.” This completely inverts the traditional saving-spending ratio most Americans follow.
The concept of lifestyle creep is another crucial factor that keeps many people from building real wealth. As income increases, most people automatically increase their spending, maintaining the same savings rate instead of dramatically growing it. The key, according to experts like Brian Tracy, is to maintain your current lifestyle even as your income grows, allowing you to invest an increasingly larger percentage of your earnings.
Rauld challenges the conventional wisdom about retirement accounts, particularly 401(k)s, citing two main issues: money being tied up until retirement age and hidden fees that significantly eat into returns. He provides an example where the stock market gained 20%, but after fees, an investor only saw 7% returns.
Instead, he advocates for alternative investments, particularly real estate, which offers superior tax benefits through mechanisms like bonus depreciation and 1031 exchanges.
Active and Passive Income Streams
When it comes to investing, Rauld recommends dividing investments between active and passive opportunities. Active investments might include directly owned real estate or starting a business, while passive investments could include real estate syndications or other hands-off investment vehicles. This balanced approach allows investors to benefit from both direct control and passive income streams.
Even traditional approaches to college savings get a fresh perspective. Instead of relying on 529 plans, Rauld suggests considering the purchase of a single-family rental property. Over 18 years, the equity built in the property could more than cover college expenses, while potentially offering better returns and tax benefits than traditional college savings vehicles.
Flip The Playbook
The key takeaway is that building exceptional wealth often requires questioning conventional wisdom and being willing to take a more active role in your investments. While traditional investment vehicles like 401(k)s offer simplicity, they may not provide the optimal path to building significant wealth.
By maintaining a low cost of living relative to income and investing heavily in tax-advantaged vehicles like real estate, investors can potentially accelerate their path to financial independence.
For those interested in learning more about passive real estate investing strategies that can generate 15%+ returns without becoming a landlord, Spark Rental offers a free video course at sparkrental.com/free. The course covers five lesser-known approaches to hands-off real estate investing, with a strong focus on risk management – because high returns mean little if they come with excessive risk.
Final Thoughts
Remember, the path to exceptional wealth often requires breaking from conventional wisdom and being willing to learn new strategies. Whether through real estate syndication, direct property ownership, or other alternative investments, the key is to maintain a high savings rate and invest in vehicles that offer strong returns while managing risk appropriately.