5 Financial Habits of Billionaires That You Can Adopt
Geoffrey J. Passehl, a seasoned wealth manager at Passehl Financial, has spent years advising the ultra-wealthy. He's identified key differences in how billionaires handle their money compared to the average person. These aren't complex strategies, but fundamental shifts in financial thinking.
Treating All Accounts as One Portfolio
Unlike most people who manage retirement and investment accounts separately, billionaires view all their accounts holistically. Passehl explains, "They manage all investment accounts holistically in retirement. This approach can help reduce risk and increase tax efficiency through strategic asset location between qualified and non-qualified accounts." By strategically allocating assets and considering the entire financial picture, they minimize taxes and optimize returns. They also tend to favor ETFs (exchange-traded funds) over mutual funds due to lower costs and tax efficiency.
Key takeaway: Managing all your accounts as a unified strategy can lead to smarter tax decisions and improved long-term results, even for everyday investors.
Turning Charity Into a Strategic Money Move
For billionaires, philanthropy isn't just an afterthought; it's a core part of their financial strategy. Passehl states, "Philanthropy is more than a feel-good gesture for billionaires; it’s a core part of their financial strategy." They approach charitable giving with the same intention and planning as their investments, often utilizing private foundations or donor-advised funds. This allows them to support causes they care about while unlocking tax advantages and building a lasting legacy. According to Passehl, "Strategic philanthropy allows them to support causes they care deeply about while also unlocking powerful tax advantages and legacy-building opportunities".
Key takeaway: Think about how you can include some charitable giving in your investment strategies, which makes a difference and can benefit you in other ways.
Diversifying Like a Pro
While diversification is a common piece of investment advice, billionaires take it to an entirely new level. Passehl notes, "Billionaires diversify with precision and purpose." They spread their risk across a wide range of assets, including public equities, private businesses, real estate, commodities, venture capital, and even alternative assets like art or collectibles. This isn't about blindly chasing trends but about building a resilient portfolio capable of weathering economic storms and capitalizing on emerging opportunities.
Key takeaway: Adopt the mindset that diversification is essential for your financial foundation, creating a portfolio that can adapt, endure, and grow over time.
Thinking Far Into the Future
Billionaires don't just worry about the present; they plan for generations to come. Passehl cites research indicating that high-net-worth individuals are significantly more likely to have comprehensive financial plans compared to the general population (84% vs. 52%). They prioritize building wealth that will last long after they're gone. Surprisingly, this long-term perspective often translates to more disciplined spending. Billionaires prioritize preserving wealth and supporting meaningful causes over indulging in immediate gratification.
Key takeaway: Aim to build strategies that consider multiple generations and not just what is happening in the world currently.
Seeking Professional Financial Guidance
Instead of handling their finances alone, billionaires rely on teams of financial professionals. Passehl highlights a significant difference: "According to Northwestern Mutual’s Planning & Progress Study, millionaires are significantly more likely to work with a financial advisor — 69% compared to just 33% of the general population." These professionals help them navigate complex financial challenges, develop comprehensive long-term strategies, and manage issues like taxes, healthcare, inflation, and market volatility. They also often utilize advanced financial products like annuities to stabilize income during retirement.
Key takeaway: Seek guidance from professional help, no matter what amount of money you are managing. It will assist in reaching any financial goals.
