The Best Place To Put Your High-Tax Income To Save Money Like Millionaires

In this current economy, with inflation through the roof, it can seem impossible to get by, let alone put aside money in order to invest. This being the case, many younger generations can't even conceive the idea of saving up for their retirement. On the plus side, for those of us that do fit this category, there are certain tricks you can apply, like putting aside $5 every day into safe, low risk index funds like the S&P 500 or Invesco QQQ to earn 10%-15% APY on your saved cash.

Even then, that process is slow, and people understandably need money now. And while there are high risk, high reward methods of investing your money for bigger gains in shorter periods of time like buying into different prominent cryptocurrencies, that isn't exactly the best idea for everyone. Still, while most don't have anywhere close to the same amount of money as the wealthiest people in the country do, they can still follow the same strategies they apply with the money we already have in order to position themselves adequately for the future. So without further ado, let's take a look at some of the tax loopholes that the rich use to pay less while still building their wealth, as well as the best place to put your high-tax income to save money like they do.

One of the most common questions regarding the richest people in America is this: how can they be worth millions or even billions of dollars and still pay so little in taxes? The answer is actually quite simple. For starters, they opt in to take relatively small salaries. Jeff Bezos, for example, only earns a salary of $81,000 a year, and uses tax write-offs to his advantage. However, for us normal people, tax write-offs can include anything like the rent you pay if you work from home, transportation costs, meals you pay for on the job, and much more.

Now at this point you may be wondering, if rich people like Jeff Bezos earn such small salaries, how do they actually make money? Well, they do this with the gains they earn from selling the stock options they're given from their companies. But they still have to pay taxes on that, right? Yes, but what they'll do is sell these stock options when their prices are low, and then reinvest that money in similarly valued stocks. This balances out any gains they may made with the losses they've taken, reducing the amount they'll have to pay in taxes while still keeping the money they initially invested. However, this next strategy is an even better way for normal people to save money like the rich.

While using tax write-offs to your advantage is something that any average person can do, things like balancing out your gains by selling your stocks when they're low and buying into other stocks at similar prices definitely doesn't sound optimal. After all, the reason you hear sayings like buy low and sell high, is because it's the best way for the average investor to make the most out of their investments.

That being said, the best way for us normal folk to be able to save money like millionaires and billionaires do is to take the gains we make from any of our investments and stick them into tax-advantaged accounts. The most common of these that us regular people have access to are retirement accounts like IRAs and 401k's. For example, any contributions made to traditional 401k's actually lower your taxable income on an annual basis. The only time taxes are applied to these is when you withdraw the money, unless you live in a state like Florida that has no tax on retirement income. However, while traditional IRAs are tax-deductible, Roth IRAs aren't. At the same time, withdrawals from them are tax-free, while withdrawals from traditional IRAs aren't. On the plus side, however, both Roth IRA's and traditional 401k's allow you to grow your earnings within them tax free.