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What Royals Know That You Don't

Natalie Pace

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What Royals Know That You Don't. By Natalie Pace. Rich People Don't Put Their Money in Jars.

Why is it that you never hear of a lottery winner billionaire? What do royal families know that the nouveau rich don't? How can a billionaire go "bankrupt" one year, and be worth billions again the next?

10 Strategies of the Super Wealthy.

1. Rich people don't put their money in jars.
2. Pay yourself first.
3. Get an education.
4. Tax protected and financial predator proof individual retirement accounts.
5. Passive income, not earned income.
6. Gifts, not insurance.
7. Charity (and foundations), not taxes.
8. The CEO of their Money (not blind faith).
9. Offshore bank accounts.
10. Chase Wisdom, Not Returns.


And here are the details.

1. Rich people don't put their money in jars.

Money in a jar tends to be dipped into. Mostly by you. It isn't tax-protected and it can't compound. Stocks and bonds have earned, on average, 10% annualized for the past 30 years, meaning that if you were sticking $4,000 in a jar, you would have $160,000 forty years later. If it were in a tax-protected retirement account that was compounding gains of 10% annualized, you'd have over $2 million.

2. Pay yourself first.

Lottery winners think they will pay off debt first and then figure out what to do with the rest of the money. Rich people pay off debt with the gains they make in their investments - 10% gains on a million pays off $100,000 in debt. Most people think they'll start investing once they pay off their debt, and find themselves stuck in that cycle for their entire lives. Rich people know the power of compounding gains, of protecting their assets, of restructuring businesses that are losing money (without losing their own net worth) and how to turn things around even if their credit score dips.

3. Get an education.

When Asians immigrated to America in the early 20th century, they were discriminated against, abused and underpaid. Today, Asian Americans are the highest paid ethnic group in America (source: BLS.gov). That shift is as a result of a heavy cultural focus on education. There is and has always been a heavy focus on education in rich families that endure over the centuries. Education is the highest correlating factor with income.

www.bls.gov/news.release/wkyeng.nr0.htm

4. Tax protected and financial predator proof individual retirement accounts.

Put 10% of your income (pre-tax, when possible) into a 401K, IRA, health savings account or other tax-protected, financial predator proof protected retirement account. Rich people learn how to compound their gains in that account, which grows free of capital gains. If you are not doing this, then you are paying more than you need to the taxman and the health insurance company. In the worst-case financial scenario, foreclosure, bankruptcy or even murder (think OJ Simpson), your retirement accounts cannot be levied. This is one of the ways that billionaires, like Donald Trump, can restructure billions in real estate losses, and then be back on the Forbes Billionaire List within a few years.

5. Passive income.

Working people pay double the taxes of investors. The long-term capital gains tax is 15% for most people (20% for some), while income earners at the top of the scale pay 35%. Here's another important statistic. If you put 10% of your income into a tax-protected retirement account. And that earns a 10% gain (what stocks and bonds have done over a 30-year period), you'll have more money than you earn within 7 years, and your money makes more than you do within 25 years. Start at 20 and retire by age 45!

www.irs.gov/taxtopics/tc409.html
www.irs.gov/pub/irs-pdf/i1040tt.pdf

6. Gifts, Not Insurance.

Each year, you and your spouse can gift up to $14,000 per person (more if you are paying for education or medical expenses) to as many individuals as you want. Many people are paying an arm and a leg for insurance, and then living past the time when they can afford to keep up the payments - losing the benefit of the insurance they have paid for all those years. On the other hand, if you were just gifting your property and assets to your kids and grandkids, steadily (to avoid the gift tax), every year, by the time you pass on, most of the estate would be owned by them and there would not be any estate tax to pay or complicated probate to endure. This is the royal progeniture plan.

www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes
www.nataliepace.com/np.php?fxn=article&id=20130906
www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-Tax

7. Charity (and Foundations), not taxes.

Once you are in the 35% tax bracket, it pays to be charitable. You can direct your giving to the exact nonprofit organizations that you believe are creating the best good in the world, take a tax write-off, join the board and benefit from hobnobbing with other very wealthy people who are doing the same thing. Or you can build your own museum (like the Getty). You don't want to end up like the Hearsts, whose castle and beachfront villas are now owned by the state.

8. The CEO of their Money (not blind faith).

Norton Simon reportedly checked up on his bond portfolio every day. On the other hand, many unsophisticated investors, including a lot of Hollywood celebrities, had blind faith in Bernard Madoff, even feeling prideful that they had access to him where most people did not. This is the single-biggest area where lottery winners, celebrities and sports figures get it wrong - having blind faith in "experts." If you don't know anything about money, then you'd better learn, if you want to keep it.

9. Offshore bank accounts.

In Fitzgerald's short story, "A Diamond as Big as the Ritz," a family becomes obsessed with hording and concealing their diamond mine, and ultimately loses everything. Cyprus clients learned the same lesson the hard way. Cyprus was a very famous offshore tax haven. Switzerland certainly has a better reputation, however getting your money in and out has legal limitations and the cost of violating international laws is high. Bitcoin, gold coin companies and other companies that try to scare you to death so that you'll put your money in their hands, have hidden costs and risks. Investors have been burned big time over the last ten years on gold coins, even at a time when gold is relatively high in price. The price of hiding your money is far more expensive than using the tax code to your own advantage.

10. Chase wisdom, not returns.

If it's a headline, you're late. If it was 2007 and you were gambling on a house, you lost it. If it was 2000, and you were jumping into Dot Com stocks, you are still underwater. If you don't know what's safe and how to get safe today, then you are already losing money on bonds. It's not a matter of bad luck, or a mainstream media conspiracy. Once you get The ABCs of Money that we all should have received in high school, you can set up a rational and royal plan to earn money while you sleep, compound gains and live a very rich life.

www.amazon.com/The-ABCs-of-Money-ebook/dp/B00AWEM9GW/ref=sr_1_1?ie=UTF8&qid=1358285108&sr=8-1&keywords=the%2Babcs%2Bof%2Bmoney

*Tax laws change year to year, so be sure to consult IRS.gov and a CPA.

About Natalie Pace:
Natalie Pace is the author of the Amazon bestsellers, The ABCs of Money and You Vs. Wall Street. Natalie has been saving homes and nest eggs for 14 years, while at the same time earning the ranking of No. 1 stock picker. Natalie Pace is a blogger on HuffingtonPost.com and a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a strong believer in giving back, she has been instrumental in raising tens of millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Follow her on Twitter.com/NataliePace and Facebook.com/NatalieWynnePace. For more information please visit NataliePace.com.

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