Have you ever wondered how to be rich? Many millionaires blend right in with the rest of society. They attend the same universities; they have the same bank, drive the same cars, and live in the same neighbourhoods as everyone else.
What do the rich do that the rest of us fail to capitalize on? How do they get so far ahead if we all have the same opportunity?
For starters, everyone has good habits and bad habits. The rich have many good financial habits, and they’ve cut away the bad ones. Here are some quick tips to get you started on the path of how to be rich. Make these tips your good financial habits and join the millionaires club.
This post is the original motivation for our millionaires series. Read the other articles listed below to see if you live by the same values young millionaires commit to.
Rich people have a clear understanding of what rich means to them.
So, what does rich mean to you? Is it about the amount of money you have in the bank? Is it about providing for your family? Is it about driving nice cars and living in a big house?
People who are serious about building wealth clearly know what being rich means to them. Having this crystal clear understanding of what being rich means to you allows you to laser focus your goals on achieving rich status
Ask yourself what being rich means and write it down so you’ll remember it.
Rich people take the time to write down financial goals.
Do you think people get rich by accident? The not-so-well-to-do very rarely write down their financial goals. In fact, only 5% of Americans have written goals. Any guess who that 5% are? They are the rich, of course.
Begin writing down your financial goals right away. I am sure you can think of a couple off your head. Do you want to pay down debt? Do you want to save for retirement? Make sure your goal can answer these two questions. How much? By when?
Example: I want to pay off $5,000 in credit card debt by December 15, 2022.
Rich people know that a part of all you earn is yours to keep.
Many finance gurus will tell you that you need to pay yourself first. I prefer – a part of all you earn is yours to keep. Stop paying everyone else except yourself. You pay the bank for your house, the grocery store, the cable guy, and maybe you pay yourself if there is any left.
Set up a bank account that will automatically have money transferred every month. This new account will be for investing in yourself. Your broker or financial advisor can now use your automatic savings to invest in you free of human error or memory lapse. No worries about forgetting to fund your retirement accounts again.
Rich people manage their money well.
The poor are experts at mismanaging their money well, and I was too as a high school student. The rich know it’s important to track every penny (and it’s a victory to find change on the sidewalk).
Track your spending, all your spending. Using a financial tool will allow you to track your checking, savings, brokerage, credit cards, and loans in one place. I especially love using financial tools myself, because they will show me where my money was spent in a beautiful pie chart.
Rich people save more than 10% of their income.
Most people save nothing. Most financial advisors suggest aiming for 10-15% of your take-home pay. Many people gag at 10% and are convinced they can’t afford to save that much. What they mean to say is that they are not willing to save that much because they enjoy their lifestyle, which is much more important.
Many countries would laugh at our 10% (more like 1%) savings rate. In fact, India saves on average 30% of their take-home pay. I’ve also heard numbers of 50% savings in some Asian countries.
10% doesn’t look so bad when you consider the sacrifices other countries are willing to make to ensure they save more than 30% and achieve financial freedom.
Rich people take advantage of compound interest.
Rich people maximize compound interest. The rich can take advantage of compound interest because we’ve already mentioned some things.
- They know a portion of all they earn is theirs to keep
- They save more than 10%
- They manage their money well
Compound interest can be difficult to explain. Some might say compound interest is like the snowball effect. You start with some amount of money and invest it. By investing, you are beginning to roll the snowball downhill. As the snowball rolls downhill, it picks up speed and size, growing exponentially, which is much faster than a steady pace.
Rich people know the importance of a good education.
Nearly all the wealth in America gravitates toward the educated. Everyone knows the more education you have, the better your chances are of having a large salary.
Community colleges even offer certificates for specific trades and technology careers if the four-year degree doesn’t work for you. You can even consider some post-graduation classes to stay sharp and keep learning new skills after college.
Rich people immerse themselves in financial blogs, books, and magazines.
Rich people know that becoming wealthy didn’t happen by accident and didn’t happen overnight. To become excellent at a particular subject, like how to be rich, you need to surround yourself with like-minded people and resources. When you do this, then building wealth will become second nature.