Everybody thinks they want to be rich but what most people are really after is wealth. The main difference between being rich and wealthy is how sustainable your wealth is.
A rich person might only have their money for a short period – like the lottery winner who ends up destitute - but a wealthy person has enough assets that they don't have to worry about money. Robert Kiyosaki, author of Rich Dad Poor Dad says, “Specifically, wealth measures how long you can maintain your lifestyle without working.”
The good news is that anyone can build perpetual wealth and create true financial freedom for themselves. It starts with good financial habits as this puts you in complete control, enabling you to make thoughtful decisions. Bad money habits leave you vulnerable which means you could end up basing your financial decisions on your impulses at the time, rather than what’s in your best interest long-term.
Wealthy behaviour to adopt:
- Preserve your wealth: You might not have bundles of cash but wealth preservation is vital and the earlier you start the better. To put it simply, preserving wealth means making sure your money is there for you when you need it – for example, your retirement or children’s education.
- Pay yourself first: This can be as simple as committing to saving a set amount from your income. Start with 10%-15%, and then budget for expenses with the balance. Paying yourself first will help you focus on the big picture, reduce impulse purchases and help you spend more wisely on things you need and value. Put these savings to work, let them grow and it can change your life.
- Live within your means: We all want nice things, but this doesn’t happen overnight. You can get that sports car, but it might take a while to get there. Don’t buy it the minute you have some money and then spend the next 10 years paying for it. Instead, save first and when you have the means, go for it. You should be spending no more than 25% on housing whether you’re renting or buying; 10% on entertainment; and 5% of your annual wealth on holidays. Unfortunately, the reality is many of us breach these thresholds. The secret to starting to build wealth is by living within your means.
Mike Fannin, Co-founder and Non-executive Director at Carrick Wealth, shares three things that wealthy people do differently:
1. They read… the right stuff
Did you know that 80% of wealthy people read every day but, it's what they read that’s interesting. Only 10% read for entertainment; while 94% read current affairs, biographies and content for educational purposes. They’re constantly learning, educating and upskilling themselves.
2. They control tempers, fears and moods
Fear and anger can make you irrational and this could lead to bad decisions. If you’re operating from a place of fear, this can affect your wealth as you might not have the courage to invest in that business. Often when I speak to young people, they’re scared to start their own business but, what’s the worst thing that can happen? Yes, you can fail, but at 28 years of age, if you lose it all, you can start again.
3. They are not ostentatious
For wealthy people, it’s about preserving capital and that’s the smartest thing you can do. I know wealthy people who have a global soft drink empire but they don’t own fancy cars or live in a mansion. Yes, they’re comfortable, but they live within their means and that makes a big difference.