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You’ve probably noticed, but the world loves rich people. We have a billionaire U.S. president, shows like “The Rich Kids of Beverly Hills” are huge hits, and sometimes it can be tough to tell if you’re watching the Nightly News or Entertainment Tonight.
The message: It’s cool to be rich.
But not too many people are interested in following and studying the lives and habits of the rich for the most practical and beneficial reason: studying the habits of the rich is a wise way to reverse engineer wealth and success.
The honest truth is that many people are more interested in living vicariously through the lives of the rich than they are learning about how to get there themselves. (Perhaps that is why an alarmingly high number of Americans have less than $50,000 saved for retirement.)
7 Habits of the Rich You Need to Implement Yourself
The problem is that our culture has adopted and embraced all of the wrong symbols of richness. Rather than focusing on building real wealth, many people focus on building the appearance of wealth. I like to call this “fake rich.”
If you’re tired of the fake rich lifestyle and want to build wealth yourself, studying the habits of the rich is a great place to start. Read the following seven habits of the rich, slowly incorporate them into your lifestyle, and start building wealth.
1. Rich People Prioritize Saving Money
In The Millionaire Next Door, the late Thomas Stanley surveyed a panel of average everyday millionaires to find common characteristics across very different people groups. Among many habits of the rich that Stanley discovered, a focus on saving money above all else was key.
Across the board, first generation wealthy people developed their wealth thanks to long-term saving discipline and dedication to living a frugal lifestyle.
When it comes to choosing between saving and discretionary spending on things like new cars, larger homes, lavish vacations, or expensive clothing, a majority of wealthy people choose to pay themselves and save money for the future.
At the same time, wealthy people value quality over quantity, i.e. they prefer to own fewer possessions of high quality rather than many possessions of lesser quality. These quality items may cost more initially, but they last much longer and provide greater use over the long haul.
2. Rich People Avoid Debt as Much as Possible
While it may be true that debt can help you get what you want even if you can’t afford to buy it with cash, it is equally true that excessive debt is one of the top barriers to building wealth. Why? It’s hard to get rich if you’re constantly sending payments to other people.
Buying anything using debt is almost always inefficient, more costly, and it limits your ability to build your retirement portfolio, own real estate, or start a business.
Some wealthy people enjoy trying to beat the system and leverage others’ money to their advantage. Many rich people built their nest eggs this way. But it’s worth noting that a majority of wealthy people prefer to avoid this kind of unnecessary risk.
In other words, there are far more people who actually develop wealth by following The Millionaire Next Door model than people who follow the model of leveraging others’ money taught by Robert Kiyosaki in Rich Dad Poor Dad.
Maintaining low levels of debt, if any, is one of the hallmark habits of the rich. And time and time again, studies show that people who do not have debt are always on the look for ways to build even more wealth. Low debt levels put them in position to take advantage of new and unexpected opportunities to grow their wealth. Perhaps this is way a majority of first generation wealthy people are business owners.
3. Rich People Drive Used Cars
One of the most surprising habits of the rich is the overwhelming tendency to drive used vehicles. The average millionaire rarely, if ever, purchases a brand new car, allowing others with far less wealth to absorb the harsh hits of depreciation during the first 2-4 years. Then they buy well-maintained used luxury vehicles with cash.
Ironically, it is usually the “fake rich” who drive brand-new luxury cars with astronomical payments for 2-4 years. That’s when the real rich people take advantage of depreciation and snag themselves what is essentially a brand-new car for nearly half of its brand-new cost.
4. Rich People Maintain Good Physical and Mental Health
You may think wealthy people are workaholics, but the truth is that hard work and good physical and mental health are not mutually exclusive. In fact, maintaining good physical health through diet, exercise, and self-care remains one of the most common habits of the rich. And it can even save you significant cash on term life insurance!
In particular, starting the day off with a focus on health is one of the hallmark habits of the rich. A popular article in Business Insider outlined the habits of several wealthy people, including John Paul DeJoria, the man behind Paul Mitchell hair products.
- Mitchell begins each day with quiet meditation.
- Birch Box executive Brad Lande begins his morning with hot tea and yoga.
- Kevin O’Leary, the investor made famous in Shark Tank, starts his day with a 45 minute workout.
The reason behind their health-consciousness is simple: being rich is useless without health.
5. Rich People Read Two Non-Fiction Books Each Month
Among the main habits of the rich, consistent learning and growth is key. It’s not uncommon for people who have accumulated wealth to read two or more non-fiction books each month in an effort to learn new things. They’re always looking for ways to build wealth through smarter investing, new business opportunities, increasing their efficiency, or learning new skills.
For many people, the habit of reading and implementing new ideas served as the impetus for growing their brand or starting a business in the first place.
6. Rich People Build Multiple Income Streams
W.hat separates the rich from the uber rich? Most often it is the development of multiple income streams. Typically, these forms of income vary greatly, from active to passive, and include the following:
- Investment income via dividends
- Owning real estate bought with cash
- Developing a product
- Owning a business (or multiple businesses)
The time and effort required to build these income streams is usually a heavy sacrifice initially. But there is no question that it pays off.
For example, I am always working to build my real estate business and and grow my blog up as two separate income streams. This year, my combined earnings from my real estate business and my blogging income have already exceeded what I will earn in all of 2018 at my day job. It’s a lot of work to build multiple income streams, no doubt – but the effort is worth it.
7. Rich People Give Money Generously
Despite a report in The Atlantic which claimed the average rich person only gives 1.3 percent of their annual income to charity, most rich people are incredibly generous. They’ve built their wealth, in most cases, by helping other people. And many of them received a helping hand themselves while building their business, which makes them far more likely to have an emotional need to give back themselves.
Ultimately, the main reason behind why so many wealthy people do give generously is that they have developed a healthy, well-adjusted attitude toward money. Psychologically-speaking, they understand that helping others who are in need is rewarding and self-satisfying. Simply put, it makes them happy.
One thought I heard on giving has always stuck with me: It is difficult to receive anything in life with a tightly closed fist.
How can you apply the habits of the rich in your life?
Studying the habits of the the wealthy has a very limited payoff unless you’re willing to do the work and put what you learn into practice. But the good news is anyone can start small and change their habits slowly over time.
Here are a few simple suggestions to change your money habits:
1. Get on a Budget
If you’re not in the habit of saving and investing money, you need to take definitive steps toward gaining control of your cash flow. If you’ve never made a budget or analyzed your current financial situation, our guide to budgeting is easy place to start – and it’s been read by over 150,000 people in the past year! (And if you’re not a natural saver, automating your savings may be just what you need to start.)
2. Look at the Big Picture of Your Finances
One of the simplest ways to gain a birds-eye view of your financial big picture is by signing-up for my favorite FREE financial tool, Personal Capital. With Personal Capital, you can monitor your spending by category, track all of your debt and assets, and even receive a personalized review of your finances. Get it here!
3. Cut Out Stupid Expenses
If you’re looking for a quick way to reduce your expenses and save more money, you can join thousands of others who have trimmed their budget of unwanted and unused recurring subscription services by using the FREE Trim Financial Manager. When you sign-up, Trim will review your regularly-recurring transactions, negotiate for better rates on your behalf, and even help you cancel unwanted subscriptions for you. You can learn more about Trim here.
4. Refinance High Interest Debt
Developing better habits may seem unlikely or even hopeless if you find yourself struggling with the burdens of debt. Refinancing is not the silver bullet to debt problems; in fact, it just serves to lessen the symptoms of the underlying problem. But if you’re paying sky-high interest rates, reducing them is an incredibly smart way to jump start a rapid repayment plan.
If you have high-interest student loan debt, I recommend giving Purefy the opportunity to review your situation and provide options. If you have a few minutes you can fill out this quick form and receive quotes without affecting your credit score one bit. If you still owe a sizable amount on your Associates, Bachelors, or Masters degree loans, this is literally one of the easiest ways you can free up money in your budget.
Finally, with mortgage rates likely to continue their recent slow rise, now is the time to consider refinancing and locking in a better rate, especially if this has been on your radar for a while. The company I recommend most to gather your options is LendingTree. They can match you up with the most competitive rates for which you qualify and help you save thousands of dollars over the lifetime of your mortgage.
Remember, the key is to start adding new habits to your daily routines little by little. Go for an evening walk, grab a new non-fiction book at the library, and start practicing silence and solitude.
If you’re willing to work on building better habits, great things will come your way this year!