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Personal Finance

Money Habits of the Wealthy

By June 1, 2022 No Comments

There are rich people and there are wealthy people. What makes a person rich may not make them wealthy and vice versa if you consider wealth to be measured by only tangible assets and “being rich” as a person who has a fulfilling life.

There are two types of wealthy people. People who start out that way and people who become wealthy. This article will focus only on self-made millionaires, the people who were not born rich but became that way through hard work, good luck, or in the case of the average millionaire, a little of both.

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What are the 3 habits of a rich person?

Many self-made millionaires started out as regular people with regular jobs and a dream. They set financial goals that would allow them to become the kind of people that made their money work for them rather than the other way around. While it may be oversimplifying and generalizing things overly much, there are three possible habits that you may see from someone who has worked hard at building wealth.

Habit #1: They Avoid Debt When Possible

Debts are like very needy pets. Every time you think you have them well in hand, something else comes along and you are back in the hole. Financial planners try to get clients to work on eliminating new debts and to prioritize paying down older debts, especially the ones with higher interest rates.

Instead of using consumer credit like credit cards, revolving accounts, or loans, only buy the things you need and can afford to buy outright. Put aside money for larger purchases, giving you the time to scour for deals, choose your options wisely, and decide if you really want or need the item.

Eliminate your car payment by buying a well-made car and being prepared to do all of the upkeep so that it runs well for a long time.

Tip: The cost of car insurance on an older, well-maintained car is much lower than a policy for a newer car. A new car may also require that you carry full coverage insurance at a much higher premium rate than if you would pay for a liability-only policy.

Habit #2: They are ready for an emergency.

Do you have an emergency fund? An emergency can be nearly anything and as current events have proven, can devastate even the most prepared people.

If you ask a financial advisor, they will tell you that you should have between 3 and 6 months of a financial cushion set aside in the event that you will not be able to work for that period due to health, injury, or other catastrophes. Your rainy day fund is meant to cover the basic costs of keeping your home and family running as normally as possible and should include the cost of food, shelter, and basic living expenses.

This fund should be placed in an account that will allow it to grow interest at the highest possible rate.

Habit #3: They invest to build wealth.

Of course, there is going to be investing. Successful people do not just hit a milestone and then stop trying.

Different people are going to use different investment strategies, but one thing is true for all of them: they will have done their homework before they give up a single dime of their wealth.

They are going to watch the business news. They are going to read up on stocks and companies. They are going to know more about a company’s business practices than the average person would dream of knowing. They might even know more about the business than the people that work there.

What are the common habits of a millionaire?

People who are very wealthy rarely waste money, seem to have an interest in personal development, and rarely consider spending money on big things that will give them instant gratification but little long-term joy.

The saying “you can’t buy happiness” was probably first used by a rich person.

If you think you have never met a millionaire, you might be surprised. The big difference between having “some money” and being wealthy is that the latter rarely feel the need to flaunt what they have. The wealthiest people are not always the people living in tacky gold mansions and bragging about their checking account.

How do most millionaires get rich?

Nearly all of the millionaires in the entire world have made their fortune from investing. What do they invest in? For 90% of these wealthy folks, real estate is the key to wealth building.

Real estate investing is very complex and new investors may actually have to borrow money despite the commonly accepted rule of avoiding debt as much as possible. It can also mean a lot of different opportunities such as buying rental properties, flipping properties, or holding on to commercial lots until the market is robust and the sale will result in a lot more money.

Real estate investing is sometimes considered passive income in that the properties can be making money with little effort but that is not always the case. For a new landlord, rental properties can be a never-ending string of empty units, expensive repairs, and tenants that disappear without paying.

What are some money habits of the wealthy that I can do?

One of the easiest money habits that anyone can do is to learn to properly manage money. If you have $100 and spend $50 on lottery tickets, you have possibly wasted half of your money. On the other hand, if you put $5 of that into a high yield savings account, you are saving money and earning the interest as well. Not a lot, to be sure, but not everyone is born having a million-dollar net worth.

On a more serious note, eliminating debt is one of the key habits that you should work toward. The average American has just over $6000 in credit card debt. If that debt is on a high-interest credit card, they will be paying off the interest for months, maybe years before they touch the principle. You can’t start to save money let alone invest it if you are tied up in paying down the interest and fees of a single bill.

Another thing that anyone can do with or without significant savings is to set an actual budget that you can live with. It may mean that you spend money on fewer nights out but you will build up your bank account and be in a better position to start investing toward your future.

Finally, rich people never stop looking for a new cash flow. Investing money is only one part of the equation. Look for as many ways to get your net worth higher and never stop learning.

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