7 Habits of the Wealthy

Have you read the book, “Rich Like Them” (you can read my review if you don’t want to read the entire book). In it, the authors were surprised to find that millionaires lived normal lives, dressed modestly, many came from meager backgrounds, and didn’t flaunt their wealth … despite the amount of money they had.

Warren Buffet, one of the wealthiest people alive, has lived in the same modest home since 1958. It seems like every year or so, we find out that an apparently “poor” person left millions to a charity or that a janitor making minimum wage for the last 45 years has a net worth well into seven figures. I’m sure that you personally know people who are worth well over $1 million, but because they don’t wear it, drive it, live in it, or otherwise parade the result of their hard work and/or investing prowess in front of the world, you probably would never guess how much they’ve accumulated.

The usual problem that people have isn’t a lack of money, it’s misplaced priorities. The wealthy among us can teach us a lot about priorities and money. They know where to put it, how to invest it, but more importantly, where not to spend it – and isn’t that where we have the most trouble?

Sure, you could argue that they make a lot more than you do, and that is absolutely true. You could say they inherited it and that may or may not be true (most millionaires are first generation). However, I believe there are reasons they make more than we do.

7 Habits of the Wealthy

1. Avoid debt. For years and years, I was pretty deep in consumer debt. Only when I dug myself out of it did I realize how much I was actually paying in interest. Now that interest works for me.

2. Put money work for you. The wealthy invest in the stock market … plain and simple. Though some people are scared of making these types of investments, if you learn the basics of Rule #1 Investing, you’ll learn to invest in a business rather than a stock. At that point, the fear factor tends to diminish. If you are still wary of investing in a business, consider reading my series on ETF investing.

3. ONLY spend money on things that provide a return on your investment. Consider each expenditure you make: will it give you a decent return or is it just a frivolous expense for convenience or indulgence? Consider this: if you were to inherit a cool $100,000 in cash, what would you spend it on? If you’d start a business or buy some rental properties, you’re on track. If you’d take your 5 best fiends on a ’round-the-world-cruise, buy a new sports car and a new wardrobe ,,, not so much.

4. Educate yourself. Advanced or professional degrees (medical degrees, law degrees, and MBAs) are not earned overnight. Trust me, getting an MBA isn’t a walk in the park and it isn’t cheap but education that puts you into a different economic strata is one of the ways normal people become wealth. I’ve heard people mention how “lucky” a doctor was to have a successful practice, but I don’t think they realize how many years and how much work it took to earn that degree in order to earn that salary.

5. Never use your home as an ATM. At one time, I made this mistake – refinancing and taking equity from my home. The difference was that I didn’t spend it but invested it. Right now, I’m in “mortgage payoff” mode and won’t do it again. Why? According to one very wealthy person I spoke with, if you always have a mortgage, then you’ll always owe and your house is no longer the asset it could be.

6. Work, work, work. Any successful person who has either built a business or otherwise acquired wealth will be the first to tell you that hard work is most important. Great entrepreneurs such as Henry Ford, (Ford Motor Company), Dave Thomas (Wendy’s Founder) and Brian Scudamore (1-800-Got-Junk) were not formally educated, but they had great ideas and worked hard to build their companies. You may not have the desire to be an build a business, but hard work, regardless of your profession, pays off.

7. Live within your means. You don’t have to be a CEO to have money in the bank. Every few weeks or months we hear a story of someone who was otherwise considered poor but had a multi-million dollar portfolio they left to a charity or university. It isn’t how much you make, it’s how much you spend of what you make. Spend 140% of it (like our government) and you’ll soon find yourself in trouble. Spend only 50% of what you make, investing the rest, and you’ll find yourself amongst the wealthiest people you know.

Which habits will you develop?

We are a collection of habits … habits we chose and habits we cultivated. Which of these habits of the wealth will you choose. Which will you cultivate?

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