Maybe it’s crossed your mind at some point in time that it must be really rather nice to be, well, ridiculously rich. You’ve possibly even given some thought to what car you’d buy, or what you’d want to splash out on for a loved one. But beyond purchasing the odd lotto ticket or being somewhat tempted by that investment ‘opportunity’ that spells Pyramid scheme, there’s not all that much you can do (at least, not legally) that’ll get you rich quick, right?
In fact,Warren Wilkinson, Franchise Principal and Certified Financial Planner at Consult by Momentum, says there is actually quite a bit you can do that will set you on the right track to becoming wealthy – though it certainly won’t get you there overnight.
Wilkinson has noticed several patterns and behaviours that are more commonplace among his wealthier clients. “Yes, well-off individuals typically display a good work ethic and have earned their stripes in the field that they work in, but they’ve also gotten to a very comfortable place financially because of how they save, invest and spend their money.”
Wilkinson shares 11 savings habits he has noticed in the uber-wealthy, which anyone can practise. And while they may not get you on the cover of Forbes, they’ll certainly put you in a better financial position over time.
1. Forget making it rain; the truly wealthy are all about that rainy day. While it might not sound particularly exciting, the wealthy believe in budgeting, diligently keeping track of their income and expenses to ensure that they are living within their means. They also have a “rainy day” fund, so they are covered in the case of emergencies.
2. They pay themselves first. This practice is often called reverse budgeting and sees the individual create a budget that is led by their savings goals rather than their expenses. The wealthy will typically set up automated transfers to savings accounts, investment portfolios, and retirement funds, ensuring that they save consistently and automatically while benefitting from compound interest power – not willpower.
3. They don’t do ‘bad debt’. You can keep your credit cards: the rich are not interested in high-interest loans, as they understand the negative impact debt can have on their overall financial well-being. However, by that same token, they see the value of ‘good debt’, especially if an investment has the potential to grow their business, further their career or earn them money over time.
4. They think frugal, not flash. Ever noticed how the truly rich are actually rather frugal, and seldom dripping in designer labels from head to toe? The secret to their wealth is living below their means; they save more than they earn and do not spend excessively on unnecessary luxury items. Why? They prioritise financial security over conspicuous consumption.
5. They invest strategically and rationally. Well-off individuals seek out profitable investment opportunities that will grow their wealth over time. They believe in portfolio diversification and they’re seldom unnerved by market shocks or volatility, as they understand the value of a long-term investment strategy.
6. They optimise tax. The rich understand how to leverage various strategies to (legally) minimise the amount of tax they pay. They’re well-versed in tax-efficient accounts and investments, incentives, rebates and deductions, and they make these work for them.
7. They negotiate furiously. Wealthy people are often highly skilled negotiators, which helps them secure better deals on purchases, services and contracts. Their general modus operandi is to always question the asking price. Yet they also…
8. …prioritise quality over quantity. They understand the value of investing in high-quality products and services that may be more expensive initially, but tend to last longer and thus actually cost them less long-term.
9. They take advantage of rewards and loyalty programmes. The rich maximize benefits from credit card rewards, frequent flyer programmes, and loyalty memberships to save money on travel, shopping, and other expenses. Even renowned billionaire Warren Buffet is not above using discount coupons!
10. They know that real wealth starts with taking ownership of their finances. Wealthy individuals strive to stay on top of their finances; they pay attention and don’t simply outsource their money management to others without asking questions. They take a keen interest in their finances, educate themselves on investment strategies and economic trends, and believe in continuous learning.
11. However, they also understand the value of consulting a professional. Most wealthy individuals don’t try and do it all on their own; they understand the value of working with – and being guided by – a skilled and experienced professional, who they trust to help them make informed decisions when it comes to their investments.
Sure, you might save a few rands by cutting your own hair, but unless you’re a hair stylist, a botched haircut will cost you so much more to fix. The super-rich understands the value of expert advice and view working with a financial adviser as an investment in their financial success.