Yahoo Finance 5 Things Rich People Never Overpay For
The wealthiest people have the money to spend too much on the things they value — but they didn’t get all that money by throwing it away. The rich might succumb to splurging just like everyone else, but the professionals who work with them say there are certain things — usually services — that they never spend more for than they should.
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When the affluent buy the following services, they always get their money’s worth.
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Investing Fees
Since the rich earn most of their income from investments instead of labor, they take extra care not to spend too much to keep those returns streaming in.
“One area where the wealthy adamantly refuse to overpay is investment management fees,” said investing expert Chris Yang, co-founder of Coins Value. “High-net-worth individuals comprehend the formidable impact of compounding fees over time, which can significantly erode their returns.”
Many rich people have teams of financial advisors and wealth managers who develop strategies to maximize their investment dollars. The ultra-wealthy even have “family offices” staffed by full-time professionals who work exclusively for them.
Others, however, do the same things that savvy investors on average budgets do.
“They actively seek out low-cost investment vehicles like index funds and exchange-traded funds (ETFs) that track broad market indices,” Yang said. “According to a study by Morningstar, the average expense ratio for passive funds is 0.16%, compared to 0.67% for active funds.”
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Education
Few people have a more intimate window into the financial priorities of the rich than Alec Kellzi, a licensed CPA from California who works with IRS Extension Online. He previously served two of the “Big 4” accounting firms, PricewaterhouseCoopers and Ernst & Young, where he provided tax and accounting services to 30 different Fortune 500 companies.
In his experience, “Education holds immense priority for numerous wealthy families, whether for themselves or their progeny,” — but they pursue learning with ROI in mind.
“They acknowledge the prestige of certain institutions and specialized programs but remain discerning regarding the veritable return on investment,” Kellzi said. “They meticulously evaluate reputation, curriculum and long-term benefits while utilizing their connections and negotiation acumen to secure advantageous terms, potential scholarships or discounts, thereby ensuring they do not overpay for a substandard educational experience.”
Home Renovations and Design
Beautiful and even extravagant homes are a hallmark of wealth, but that doesn’t mean the rich don’t solicit bids, evaluate costs and shop around for the best prices just like middle-class homeowners.
“The affluent possess an acute comprehension of the transformative potential of home renovations and impeccable design,” Kellzi said. “However, they exercise judicious caution and meticulously vet contractors, designers and purveyors of materials to circumvent overcharges or shoddy workmanship. They leverage their resources to secure the services of preeminent professionals at equitable rates, ensuring their abodes exude refinement without succumbing to financial exploitation.”
Child Care and Tutoring
The wealthy have the means to invest in high-quality care and academic guidance for their children, but just as with private and higher education, they get the most for their money.
“The affluent recognize the paramount importance of quality child care and education for their offspring,” Kellzi said. “However, they exercise prudence and meticulously vet providers to ensure they receive preeminent services without exorbitant overcharges. They leverage their resources and connections to secure top-notch professionals at equitable rates.”
Insurance
John Crist, founder of Prestizia Insurance, has spoken at length about how he’s seen people overpay for coverage or buy unnecessary policies during his 25 years in the financial services industry — but those who do are almost never rich.
“Throughout my career, I’ve observed that wealthy individuals never overpay for insurance,” he said. “Instead, they prioritize comprehensive coverage while leveraging their purchasing power to secure the most competitive rates.”
In fact, they often hire professionals to do their comparison shopping.
“High-net-worth clients often employ financial advisors to compare quotes from various providers, ensuring they get maximum value without compromising on coverage quality,” Crist said. “They gravitate toward insurers with high financial ratings, ensuring the insurer’s ability to fulfill claims obligations. By aligning with financially strong companies, they mitigate the risk of potential non-payment on claims, which is crucial for protecting substantial assets like multimillion-dollar homes or expensive art collections.”
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