Scott Galloway shared his ultimate strategy for Americans to build wealth — and you don't have to make loads of money to do it

Vawn Himmelsbach
Scott Galloway shared his ultimate strategy for Americans to build wealth — and you don't have to make loads of money to do it
Scott Galloway shared his ultimate strategy for Americans to build wealth — and you don't have to make loads of money to do it

We adhere to strict standards of editorial integrity to help you make decisions with confidence. Some or all links contained within this article are paid links.

Not everyone believes being rich means making loads of money. Indeed, NYU professor Scott Galloway defines wealth as “passive income that’s greater than your burn.”

Galloway explained how young Americans can build wealth in an episode of the podcast “Modern Wisdom” And it’s not about getting a bigger paycheck.

The professor claims one of his friends works at an investment bank and makes $3 million in a bad year and $14 million in a good one. While he lives in Connecticut and pays an incredibly high tax rate around 50%, by all accounts he still earns a lot of money.

Don't miss

  • Commercial real estate has beaten the stock market for 25 years — but only the super rich could buy in. Here's how even ordinary investors can become the landlord of Walmart, Whole Foods or Kroger

  • Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you paying as little as $29/month

  • These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how

“But between his ex-wife, his alimony, his child support, his home in the Hamptons, his Master of the Universe lifestyle that he thinks he needs and wants to signal to his friends, I know firsthand he doesn’t save a lot of money,” Galloway said.

He’s an example of what Galloway refers to as “the working poor.” Despite how much money the friend makes, his need to maintain a certain lifestyle is an enormous source of stress on him and on his marriage.

"Being rich is “an absence from anxiety,” Galloway said. “You want to be able to live well.”

That way, he says, if you choose to keep working in your golden years, it’s a choice rather than an obligation.

Leverage the power of compounding

From Galloway’s perspective, part of being rich means you’re bringing in more income from your investments than you spend. And building that passive income is easier when you start at a younger age, since you’ll benefit from the power of compounding.

For example, thanks to compound interest, if you invest $500 each month for 40 years, assuming an 8% annual return, you will end up with over $1.5 million. “I don’t put more than 3% of my net worth in any one investment,” Galloway said.

If you want to make your money work harder for you to maximize your retirement savings, consider leveraging a high-yield, no-fee checking and savings accounts from SoFi.

While many overlook the impact of their daily accounts, with SoFi you can earn a competitive 4.60% APY on savings balances — up to 10x the national average — and 0.50% APY on checking balances with SoFi.

Plus, you can enjoy no-fee overdraft protection, early paycheck deposits and access to over 55,000 ATMs through the Allpoint network.

Take advantage of a limited time offer: sign up now for direct deposit and earn a bonus of up to $300.

To help you save even more money, check out the Moneywise’s list of the Best High-Yield Savings Accounts of 2024 so you can choose for yourself which account is best to grow your money over time.

Read more: Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)

‘Embrace diversification’

By Galloway’s own admission, getting rich — losing it — and getting rich again didn’t have a lot to do with him. For better and worse, it had to do with the market. And, in hindsight, it’s not a strategy he would recommend.

Galloway also recommends diversifying your investment portfolio, o spreading your risk across multiple asset classes, from more traditional stocks and bonds to alternative assets.

One way you can strengthen your portfolio in the long term is by investing directly in precious metals with a gold IRA with the help of American Hartford Gold. A gold IRA is a retirement account that allows you to benefit from the tax advantages of a traditional IRA and the inflation-hedging properties of gold.

If you sign up with American Hartford Gold, you’re eligible to receive up to $10,000 in complimentary silver and a free investors guide that can help protect your portfolio from market volatility and grow your money over time.

“For your own financial well-being, much less your own mental well-being, embrace diversification,” Galloway says.

However, if you’re not sure the best route to take when it comes to diversification, you may want to sit down with a reputable professional or use retirement planning tools to figure out how much you’ll need to save, accounting for inflation, to meet your retirement goals — and Advisor.com can help you find one.

Through Advisor.com, you can connect with experts who can analyze your current financial status and help determine the best way to invest for your future self. Their online platform simplifies the process of finding a reputable advisor.

Within minutes, you can find a trusted expert who will assist you in managing your income and how to leverage compound interest. Once you’re matched, you can schedule a free, no obligation consultation to discuss your goals and develop strategies to secure your retirement portfolio.

Be disciplined with your spending

Galloway says that while you can’t control fluctuations in the market, you can control how much you spend and how much you save.

For example, Galloway’s retired father has a Royal Navy pension and Social Security benefits — plus, he owns about a dozen washing machines in trailer parks. He makes about $52,000 a year without really working (as Galloway points out, he enjoys going out to collect the machine quarters). Yet, he only spends about $48,000 annually.

“His passive income is greater than his burn,” Galloway said. “That’s the definition of rich.”

On the other hand, when Galloway was younger and worked for Morgan Stanley, he got his first bonus — to the tune of $28,000. He used this money to buy a $35,000 BMW.

But, he admits, had he bought a significantly less expensive car instead and invested the rest of the money in the market, he would have generated substantial savings.

Instead of spending money on fancy cars, you can grow your money steadily with a certificate of deposit (CD). You need to have discipline when it comes to withdrawing those funds because if you withdraw them before the CD’s term is up, you’ll face penalty fees

With CD Valet — an online CD marketplace — users can shop and compare top certificates of deposit rates from various banks and credit unions nationwide.

Their extensive database shows the most competitive rates without bias, with daily rate updates and earnings calculators that give consumers an array of free tools to help them find the right CD to meet their savings goals.

Living below your means, as Galloway suggests, will ensure a comfortable retirement and long-term security.

“Be disciplined about putting some money in low-cost ETFs and index funds,” he said

While you’re being disciplined with your spending, it’s important to make the most of each transaction.

With Acorns, an automated savings and investing app, you can maximize every purchase by investing in a diversified portfolio of ETFs.

To get started, just sign up, link your bank accounts and start spending as you normally would. From there, Acorns will round up the total cost of your purchases and invest the difference into an automated portfolio. This means with every purchase, you’re not just spending money but also investing in your future.

If you sign up today, you can receive a $20 bonus to kickstart your investment journey.

What to read next

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Advertisement