Habits Of The Wealthy

Habits of the wealthy - what they are and how you can mimic them 

A from Tony Robbins is a great intro to this topic..”Success Leaves Clues”. This applies in all parts of life including wealth. By mimicking these behaviors and habits, you increase your chances of becoming wealthy.

This post is a collection of thoughts and ideas from a variety of books and articles on the subject. 

Before we get into it, let’s define what being wealthy is. I’m using the definition from the book the Millionaire Next Door which defines wealthy in the following way:

• Multiply your age by your(taxable) annual income

• Divide by 10

• Subtract any inherited wealth

The result is your expected net worth (what your next worth should be based on your income and age)

If the millionaire next door calculator shows that you’re in the top (25%) for wealth accumulation in your category, you’re a PAW or “prodigious accumulator of wealth.”

To be in the PAW category you should be worth two times your expected level of wealth.

Let’s do an example:

Let’s say Dave earns $100k at age 30 and has no inherited wealth. Does this place him in the PAW category?

• 30 X $100,000 = $3M

• Divide by 10 = $300k 

• Expected level of next worth: $300k

• To be in PAW category you would need to at least a net worth of $600k 

Do  you sit in the PAW category? Try the calculation yourself and check out my net worth calculator. 

Now that we have a definition of wealthy, let’s look at how the wealthy achieve this. Are they simply born with more cash? According to the same book, around 80% of the interviewees did not inherit any significant fortune and are self made. 

So what are some of these habits of these self made wealthy people that we can all learn from?

Living Below Your Means

Put simply, creating a lifestyle where you don’t spend everything you earn every month. Once you have a safety cushion, the rest would be invested to generate more wealth. 

Focus on building their wealth with goals and plans

Wealth accumulation doesn’t happen accidentally. It’s the result of well defined goals and plans and having the discipline to stick to those goals and plans for the long term. This also means measuring your progress along the way and taking appropriate corrective action where required. 

Focusing on being wealthy as opposed to looking wealthy

We’ve all seen the people who drive flashy cars, wear expensive outfits and jewellery and have an Instagram lifestyle to die for. But how sustainable is that lifestyle? How long would they last if their primary source of income stops? This habit focuses on ensuring you have multiple income streams and not worrying about outward appearances to demonstrate a wealthy status. 

Not taking handouts from their parents

This is all about creating wealth through your own efforts rather than constantly asking for cash from your parents to fund your lifestyle. Without doing this, you won’t have gone through the struggle most wealthy have to become who they are. 

Not spoiling their kids

Similar to the above habit, you don’t want to spoil your kids. They won’t learn the habits needed to become wealthy. 

Taking advantages of market opportunities 

According to the books and articles I’ve read, the wealthy are always looking out for the next Market opportunity and ensuring they have cash reserves to take advantage of it. This could be something as obvious as the next stock market crash or housing bubble where bargains are to be had. 

They choose the right occupation 

I think this is the one that surprised me the most. You don’t need to be in what some people would consider a high flying white collar role (such as a Lawyer or Doctor or Finance) to be wealthy. In fact these kinds of professions actually have a higher cost associated with them (e.g. suits, jewellery to look the part) when comparing them to more mainstream professions such as Teachers, Engineers etc. By choosing the right profession you keep your costs down but still accumulate wealth. The one distinction here is that the wealthy tend to be owners of business as opposed to employees.  

They diversify 

This is not only diversification of income streams but also diversification of investments (e.g. shares, property, commodities, bonds, cash etc). This means that when one area is doing badly then the others aren’t necessarily affected. This also happens to be the mistake I see over and over again when people say they’re diversified when they highlight they have just shares in just one index fund (e.g. S&P 500).  If you’re interested in learning more about investing, I offer a series of courses that take absolute beginners and turn them into investor pros. 

They have the right beliefs about what money is

They don’t believe money is the root of all evil or that it is the only thing that will bring them happiness. They recognize that it is a tool to achieve the outcomes you want.   

They read

They read and this isn’t just the trashy magazines you can pick up at Woolies. They focus on reading books that help them get better at making money. Knowledge on this topic is not just reading one book and not reading anymore, but a continuous learning journey in order to be better than you were before. Prime example, Warren Buffet who is arguably one of the most famous investors in the world, is still learning even at the ripe old age of 95!

Pay off loans and debts as a priority

Debt is a constant drag on your income. Whilst not all debt is bad (a topic for another post), the majority of standard debt will have an impact on you becoming wealthy (e.g. credit card debt, mortgages, loans etc). They focus on clearing off these debts first before they invest.  

They protect their wealth

It’s all well and good taking the time and effort to accumulate wealth but there are sharks out there who will take your money if you’re not careful. This habit is also around ensuring you’re paying the absolute minimum amount of tax you are required to. 

So there you have it. Habits of the wealthy. Hopefully there are some key things you can take away to incorporate into your day to day life. If you’d like to discuss your current situation and which courses might be suitable for you, get in touch today for your free 15 minute consultation. 

Disclaimer

None of  the content is intended to provide you with personal financial advice. Information provided is factual and educational in nature for you to apply at your own discretion. 

You may wish to seek independent financial advice from a professional advisor for advice pertaining to your specific situation.