Sometimes, I daydream about what my spending habits would be like if I was really, really rich. Would I give it all away? Invest it all? Invest it all in… purses? But it turns out, the wealthy have a lot in common when it comes to spending their money. If I hit the jackpot, I’d probably spend my money like them — at least if I wanted to keep it.
Here are five personal finance and banking secrets that extremely wealthy people work into their money management habits. The best part? Most of them are followable, no matter your tax bracket. Now, tips for actually becoming a billionaire? I don’t have those. So, keep reading. This might be the closest any of us ever get.
1. Invest in your personal growth and ideas
Robert Wilson, a financial advisor and frequent news commentator, made an interesting point about what entrepreneurs invest in to become successful and wealthy: Themselves.
“Many middle-class workers think that starting a business is too risky,” he told GOBankingRates.com. “The wealthy understand that what’s risky is allowing your time and earnings to be dictated by a boss who couldn’t care less about whether you get what you want for your life.”
2. Don’t eat out
While I’d like to imagine my multi-millionaire self would be enjoying lots of surf and turf once I hit it big, it turns out the one percent don’t spend their money on fine dining. A study conducted by author Paul Sullivan and his colleague Brad Klontz, a clinical psychologist, found that the top one percent of earners in America spent 30 percent less on eating out than the top five percent. They saved that money for retirement instead. I guess it’s just not good business to always be spending on brunch.
3. Live below your means
The very rich rarely spend what they could spend in their everyday life. Living below your means allows you to invest, invest, invest and grow your wealth — helping your net worth to skyrocket. It also gives you a good security blanket in case the financial goings get tough, allow you to avoid potentially crippling debt. You know, beyond the student debt you’re statistically likely to be drowning in. Don’t believe me? In 2018, Warren Buffet was still living in a home he bought in 1958. It was $31,500. Jeff Bezos reportedly drove a Honda Accord for years after becoming a billionaire.
4. Diversify your portfolio
The extremely wealthy are rarely existing on just one stream of income — the ones that work, that is. Beyond having a diverse investment portfolio, they are often working on multiple projects at once. They might have a primary source of income, a board membership, a passion project or two and “brand” projects like speaking engagements or book authorships going on all at the same time. Dedicating yourself to several projects at once — what us commoners call “side hustling” — increases your cash flow and gives you something to fall back on if your primary source of income falls through.
5. Time matters more than timing
While some bidders may argue that good timing is the most important aspect of an investment, the extremely wealthy know that giving an investment time to grow is much more important that waiting around for the perfect time to strike or putting all your money on red because the timing seems God sent. Giving your money time to grow by investing as much as possible as soon as possible is the way of the really rich. Whether or not they made that money on their own terms? I can’t tell you.
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