You probably have personal finance rules you follow. But how practical are these rules for billionaires? The truth is the ultra-wealthy don’t follow most of these rules. Here are the most common personal finance rules that don’t apply to billionaires and why.
Here are the money moves Musk has made instead, proving what a billionaire’s wealth looks like.
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The 50/30/20 rule is a budgeting method that suggests allocating 50% of your paycheck to needs, 30% to wants and 20% to savings and investments. While the rule works for the majority of people, it’s irrelevant for billionaires because they don’t rely on one income stream. Billionaires don’t allocate their income to various expenses. They structure their finances around investments and business ventures with potential for exponential returns.
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Finance experts often recommend having an emergency fund of at least six months’ worth of living expenses to cover unexpected bills in the future. However, billionaires don’t need an emergency fund. Even in economic downturns, they don’t rely on cash reserves because they their wealth across multiple investments and assets, as reported by Money Talks News, which they can liquidate if needed.
The rule of 72 is a formula used to estimate how long it will take to double the value of an investment with a fixed annual interest rate. By dividing 72 by the annual interest rate, you get an estimated number of years it will take to double your money.
While this rule is useful for everyday investors, billionaires don’t sit back and wait for compound interest to do the magic.They leverage high-risk, high-reward investments that can generate massive returns over time, as referenced in a Medium post by Alpha Global Investments.
The 25x rule is a retirement strategy that suggests saving 25 times the annual amount you plan to spend in retirement to retire comfortably. This rule is based on the 4% withdrawal rule, where you can safely withdraw 4% of your retirement savings each year without running the risk of outliving your savings.
This traditional retirement planning strategy doesn’t apply to billionaires, according to a post on Unboxify. In fact, many billionaires never retire — they tend to continue to buy assets and invest in wealth-generating companies even in their golden years.
