Everyone wants to know the secrets of the wealthy.
There has to be something they know that we don’t, right?
These 10 things won’t just save you money, they will help you get on the path to building real wealth:
1. They Focus On Equity
Most people think a high income is what leads to becoming wealthy. While a high income surely helps, ownership is the path that brings the most wealth.
Award winning authors, Dr. Thomas J. Stanley & Dr. William D Danko, co-authors of The Millionaire Next Door write, “60% of millionaires are headed by self-employed owners of businesses”.
In America, fewer than 20% of households are self-employed business owners, but these self-employed people are 4x more likely to be millionaires than employees. Safe to say business owners are far more likely to become millionaires.
It’s actually not even close.
You can get equity by owning a business, working at a company that gives you ownership overtime, etc.
This is where the real wealth gets built.
2. They Own Real Estate
I know, I know, I harp on real estate all the time and that it isn’t that great of an investment.
However, when I say this I am mostly saying your primary residence or a cash flow negative rental. If you choose to buy a house, live in it for a while, pay it off, etc. then it’s great.
However, the best investments in real estate tend to be rentals. Many wealthy people own multiple investment properties, make a profit on them yearly, all while someone else is paying off the mortgage.
Owning real estate can be a great way to diversify your portfolio & build wealth.
3. They Rarely Sell Investments
Most people with little wealth barely invest. Then they end up selling those investments when the market is down or to buy some other things they want.
The wealthy do not do that. They create portfolios that they stick with for long periods of time.
This allows them to keep their investments compounding.
Your biggest goal should be to allow your investments to compound for the longest time possible!
4. They Focus On Investing Over Savings
Saving is all about having cash for short term goals.
Investing is about growing your money to help pay for your future. The wealthy prioritize investing while others with good incomes prioritize spending.
Huge distinction between the two.
The wealthy buy themselves more freedom in the future, while the non wealthy spend the money and are right back to where they started.
The wealthy focus on having a high investing rate over anything else.
They will always ensure a solid percentage of their income is being invested.
5. They Focus on Long Term Wealth
The wealthy understand that building wealth takes time & that there are no true get rich quick schemes. This allows them to stay focused & not fall for every new shiny investment that comes across the table.
Avoiding bad investments is a skill!
6. They Know What They Like and They Spend There
Wealthy people take the time to understand the things in life that bring them happiness.
It might be vacations with their family, a nice home, giving to organizations they love, etc. The key here is that they spend on those areas & cut in the areas that don’t bring them happiness.
It is hard to build wealth if you have to have the nicest possessions, vacations, lifestyle, etc.
By knowing what they actually like, they are able to cut in other areas. This allows them to continuously spend less than they make which we all know is the key to building wealth!
In the book The Millionaire Next Door, the authors thought that the wealthy were the ones that wanted caviar, the nicest aged bottles of wine, etc. But what they realized was that the wealthy did not want that.
They were actually the ones who avoided spending money on these luxury goods & that's why they became wealthy.
The people who are not wealthy but want to appear wealthy are the ones who consume such luxurious goods .
7. They Lean On Experts
The wealthy understand that they only have so much free time & knowledge & that others can help them in areas that aren’t their specialities.
They can put their ego aside and trust others. They work with financial planners, tax strategists, business coaches, attorneys, etc to help fill their knowledge gaps. This allows them to build wealth in a more efficient way with less mistakes than they would make on their own. Those mistakes are often more costly than the fees of experts.
It also frees up their time to spend elsewhere.
8. They Know Their Network Is a Key To Success
We all have heard the phrase “it’s not about what you know, it’s about who you know.”
This could not be any more true. You can say it’s unfair that certain people have a leg up based on their parents, but anyone can build a network.
We have social media, events, & friends who can help connect us to others.
Take advantage of it because your network can help you build a business, get a job, find mentors, & more.
These are all crucial to your future success.
Doing good work is not enough.
You need good people by you.
9. They Aren’t Fearful Of Good Debt
People can say whatever they want about debt, but in my mind there is good debt & bad debt.
Those with little wealth have mostly bad debt like car loans, credit card debt, personal loans, etc.
These don’t help you build wealth, they destroy it. The wealthy focus on leveraging debt to help them build wealth.
Sure, they might be able to buy that house with cash, but they choose to leverage debt & keep their investments compounding.
They understand that they can leverage this low interest debt on appreciating assets. Most importantly, the wealthy do not get in bad debt.
They avoid buying things they cannot afford.
10. They Have A Plan In Place
The wealthy understand that everything good in life comes by planning for it.
But they also understand that the plan often needs to be changed because life changes quickly.
So they create a plan, then review and make adjustments to it regularly. This allows them to not only keep their larger goals in view, but to continually optimize the path toward them.
These 10 things are crucial differences between those who amass wealth and those that don’t. You can do all of these through discipline and hard work!
Financial Advisor