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Step 1: Pay off credit

“The first thing I would do is pay off all your credit cards,” said Cuban. “Because that’s costing you 18%.”

Interest rates have moved a lot higher than that in recent months. The average credit card interest rate is currently 27.81%, according to Forbes Advisor. Americans collectively owe $1.08 trillion on their credit cards, according to the latest data from the Federal Reserve Bank of New York.

Even if you’re earning double-digit returns on the stock market, expensive debt can hold you back from achieving your financial goals and securing your future.

Step 2: Buy in bulk

Cuban insists that spending $50,000 on bulk purchases for essential items is probably smarter than investing in stocks. He calls this the “transactional value of cash.”

"It's so hard to make a return on regular investments that you're better off when you see a sale," Cuban once told Vanity Fair. "You're better off buying two years worth of toothpaste when it's on 50% discount.That's an immediate return on your money."

LendingTree, an online lending marketplace, analyzed the impact of bulk buying across 30 common household products, ranging from paper towels to batteries. It found that the average consumer could save, on average, 27% on these essential items, simply by stocking up when discounts were available.

“A lot of people say you’re losing money to inflation when you just have cash in the bank. Completely disagree,” he said. “I can take my cash and go get a better value.”

Step 3: Figure out your budget

Creating a budget and sticking to it, the "Shark Tank" judge believes, is a better way to extract value from your cash. He advises taking the time to analyze your spending habits and make adjustments to save some money.

Just by spending conservatively, he said, “you can make a better return and end up with more cash than trying to fight the John Paulsons of the world.”

New York-based hedge fund manager John Paulson made $15 billion betting against subprime mortgages in 2007, in a move that has been described as the “greatest trade ever.” Ordinary investors don’t have access to sophisticated trades like this, but that doesn’t mean they can’t make a decent return on their money.

Paying off debt, buying essentials in bulk and setting a budget are all great. But savings don’t compound and no one becomes wealthy just by saving.

But it doesn't have to be complicated. Instead, a simple index fund should help most savers boost their wealth over time. In fact, between January 1994 and September 2023, the S&P 500 index has outperformed the Credit Suisse Hedge Fund Index by 2.8% on average each year. So, David certainly has a shot against Goliath.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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